February 9, 2017 - 14:0
Speaker: Markus Reisinger (Frankfurt School of Finance)
“Strategic Product Variety Choice: Theory and Empirical Evidence"
Venue: GREDEG Sophia Antipolis - room Picasso
Abstract: We investigate theoretically and empirically how rms choose their product variety in response to changes in the market environment. We consider a model in which rms 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 rm's product variety. We nd 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 rms to expand their product variety. Using data from the German magazine industry, we nd supportive evidence for these predictions.
co-authored with: Ulrich Kaiser (University of Zurich)