Multiproduct Quality Competition: Fighting Brands and Product Line Pruning
American Economic Review
vol. 93,
no. 3, June 2003
(pp. 748-774)
Abstract
Firms selling multiple quality-differentiated products frequently alter their product lines when a competitor enters the market. We present a model of multiproduct monopoly and duopoly using a general "upgrades" approach that yields a powerful analytical framework. We provide an explanation for the common strategies of using "fighting brands" and of product line "pruning." The optimal strategy depends on whether entry prompts an incumbent to expand or contract its total output. We also present a general condition that guarantees that a monopolist will sell but a single product. Our model addresses other issues, including intertemporal price discrimination and "damaged goods."Citation
Johnson, Justin, P., and David P. Myatt. 2003. "Multiproduct Quality Competition: Fighting Brands and Product Line Pruning ." American Economic Review, 93 (3): 748-774. DOI: 10.1257/000282803322157070JEL Classification
- L11 Production, Pricing, and Market Structure; Size Distribution of Firms
- M31 Marketing
- D43 Market Structure and Pricing: Oligopoly and Other Forms of Market Imperfection