Product Proliferation: An Empirical Analysis of Product Line Determinants and Market Outcomes

Marketing Science, Vol. 2, No. 18, Pp. 137-153, 1999

Posted: 9 Nov 2000

See all articles by Barry L. Bayus

Barry L. Bayus

University of North Carolina Kenan-Flagler Business School

William P. Putsis

London Business School

Multiple version iconThere are 2 versions of this paper

Abstract

Previous theoretical research has identified three primary effects of a product proliferation strategy: (1) a broad product line can increase overall demand, (2) a broad product line can affect supply by increasing costs, and (3) broad product lines can have strategic consequences (e.g., long product lines can deter entry, thereby allowing an incumbent firm to raise prices). In this paper we propose a three-equation simultaneous system that captures both the determinants and market outcomes of a firm's product line decisions. In particular, we specify market share, price and product line length equations, which are estimated by three stage least squares. Our empirical results for the personal computer industry over the period 1981-1992 demonstrate that product proliferation decisions have both demand (market share) and supply (price) implications. Our empirical results also suggest that the firm-level net market share impact of product proliferation in the personal computer industry is negative (i.e., the cost increases associated with a broader product line dominate any potential demand increases). As expected, we find that structural competitive factors play an important role in the determinants and market outcomes of a firm's product line decisions. However, we do not find evidence of firms using proliferation strategies to deter entry in this industry. Finally, we also demonstrate that some of the empirical conclusions from previous research are reversed once product line length is specified as endogenous in the share and price specifications.

Note: This is a description of the article and not the actual abstract.

JEL Classification: C3, L1, M3

Suggested Citation

Bayus, Barry and Putsis, William P., Product Proliferation: An Empirical Analysis of Product Line Determinants and Market Outcomes. Marketing Science, Vol. 2, No. 18, Pp. 137-153, 1999. Available at SSRN: https://ssrn.com/abstract=248427

Barry Bayus (Contact Author)

University of North Carolina Kenan-Flagler Business School ( email )

McColl Building
Chapel Hill, NC 27599
United States
919-962-3210 (Phone)

William P. Putsis

London Business School ( email )

Sussex Place
Regent's Park
London, London NW1 4SA
United Kingdom
44-0-171-706-6733 (Phone)
44-0-171-724-1145 (Fax)

Register to save articles to
your library

Register

Paper statistics

Abstract Views
762
PlumX Metrics
!

Under construction: SSRN citations will be offline until July when we will launch a brand new and improved citations service, check here for more details.

For more information