Strategic Product Variety Choice

Theory and Empirical Evidence

Ulrich Kaiser, Markus Reisinger

Research output: Contribution to conferencePaperResearchpeer-review

Abstract

We investigate theoretically and empirically how firms choose their product variety in response to changes in the market environment. We consider a model in which firms decide on the optimal number of products and on the optimal investment in quality. The interplay between these two choices yields to novel predictions on how market conditions shape a firm’s product variety. We find that higher revenue per consumer leads to a reduced number of products, whereas an increase in the number of competitors or a larger share of loyal consumers induces firms to expand their product variety. Using data from the German magazine industry, we find supportive evidence for these predictions.
Original languageEnglish
Publication date2019
Number of pages40
Publication statusPublished - 2019
EventDRUID19 Conference - Copenhagen Business School, Frederiksberg, Denmark
Duration: 19 Jun 201921 Jun 2019
Conference number: 41
https://conference.druid.dk/Druid/?confId=59

Conference

ConferenceDRUID19 Conference
Number41
LocationCopenhagen Business School
CountryDenmark
CityFrederiksberg
Period19/06/201921/06/2019
Internet address

Keywords

  • Product variety
  • Quality investment
  • Consumer loyalty
  • Consumer heterogeneity
  • Price competition
  • Magazine industry

Cite this

Kaiser, U., & Reisinger , M. (2019). Strategic Product Variety Choice: Theory and Empirical Evidence. Paper presented at DRUID19 Conference, Frederiksberg, Denmark.
Kaiser, Ulrich ; Reisinger , Markus. / Strategic Product Variety Choice : Theory and Empirical Evidence. Paper presented at DRUID19 Conference, Frederiksberg, Denmark.40 p.
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Kaiser, U & Reisinger , M 2019, 'Strategic Product Variety Choice: Theory and Empirical Evidence' Paper presented at, Frederiksberg, Denmark, 19/06/2019 - 21/06/2019, .

Strategic Product Variety Choice : Theory and Empirical Evidence. / Kaiser, Ulrich; Reisinger , Markus.

2019. Paper presented at DRUID19 Conference, Frederiksberg, Denmark.

Research output: Contribution to conferencePaperResearchpeer-review

TY - CONF

T1 - Strategic Product Variety Choice

T2 - Theory and Empirical Evidence

AU - Kaiser, Ulrich

AU - Reisinger , Markus

PY - 2019

Y1 - 2019

N2 - We investigate theoretically and empirically how firms choose their product variety in response to changes in the market environment. We consider a model in which firms decide on the optimal number of products and on the optimal investment in quality. The interplay between these two choices yields to novel predictions on how market conditions shape a firm’s product variety. We find that higher revenue per consumer leads to a reduced number of products, whereas an increase in the number of competitors or a larger share of loyal consumers induces firms to expand their product variety. Using data from the German magazine industry, we find supportive evidence for these predictions.

AB - We investigate theoretically and empirically how firms choose their product variety in response to changes in the market environment. We consider a model in which firms decide on the optimal number of products and on the optimal investment in quality. The interplay between these two choices yields to novel predictions on how market conditions shape a firm’s product variety. We find that higher revenue per consumer leads to a reduced number of products, whereas an increase in the number of competitors or a larger share of loyal consumers induces firms to expand their product variety. Using data from the German magazine industry, we find supportive evidence for these predictions.

KW - Product variety

KW - Quality investment

KW - Consumer loyalty

KW - Consumer heterogeneity

KW - Price competition

KW - Magazine industry

KW - Product variety

KW - Quality investment

KW - Consumer loyalty

KW - Consumer heterogeneity

KW - Price competition

KW - Magazine industry

M3 - Paper

ER -

Kaiser U, Reisinger M. Strategic Product Variety Choice: Theory and Empirical Evidence. 2019. Paper presented at DRUID19 Conference, Frederiksberg, Denmark.