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Retail structure and product variety

Author

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  • Marie-Laure Allain

    (CECO - Laboratoire d'économétrie de l'École polytechnique - X - École polytechnique - IP Paris - Institut Polytechnique de Paris - CNRS - Centre National de la Recherche Scientifique)

  • Patrick Waelbroeck

    (ENST - Ecole Nationale Supérieure des Télécommunications)

Abstract

We examine the impact of horizontal and vertical market structure on innovation and product variety. We consider a market for a homogeneous good where it is possible to innovate to launch a new substitute product. The cost of launching the new product is fixed and spread between the manufacturing and the retail industries. We show that a vertically intergrated firm offers a wider variety of products than a chain of monopolies. If the cost of launching a new product is equally shared among the vertical structure or mostly supported by upstream firms, retail competition partially restores the incentives to innovate of the vertical structure. Yet when the cost of launching a new product is mostly supported by the retail sector, downstream competition even leads to more innovation than vertical integration.

Suggested Citation

  • Marie-Laure Allain & Patrick Waelbroeck, 2006. "Retail structure and product variety," Working Papers hal-00243032, HAL.
    • Handle: RePEc:hal:wpaper:hal-00243032
    Note: View the original document on HAL open archive server: https://hal.science/hal-00243032
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    References listed on IDEAS

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    Cited by:

    1. Patrick Waelbroeck & Marie-Laure Allain, 2007. "La concurrence entre distributeurs favorise-t-elle la variété des produits ?," Économie et Prévision, Programme National Persée, vol. 178(2), pages 1-14.
    2. Dipankar Das, 2019. "Multilayer of Suppliers Fixed Costs and Spatial Competition in the Upstream Market as a Source of Retailers Buying Power," Studies in Microeconomics, , vol. 7(2), pages 210-226, December.

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