Competition, Product Proliferation and Welfare: A Study of the U.S. Smartphone Market

45 Pages Posted: 9 Oct 2014 Last revised: 30 Aug 2016

See all articles by Ying Fan

Ying Fan

University of Michigan

Chenyu Yang

University of Maryland - Department of Economics

Multiple version iconThere are 2 versions of this paper

Date Written: August 18, 2016

Abstract

This paper studies (1) whether, from a welfare point of view, oligopolistic competition leads to too few or too many products in a market, and (2) how a change in competition affects the number and the composition of product offerings. We address these two questions in the context of the U.S. smartphone market. Our findings show the market contains too few products and that a reduction in competition decreases both the number and variety of products. These results suggest that merger policies may need to be stricter when we take into account the effects of a merger on product choice in addition to those on pricing.

Keywords: endogenous product choice, product proliferation, merger, smartphone industry

JEL Classification: L11, L15, L13, L63

Suggested Citation

Fan, Ying and Yang, Chenyu, Competition, Product Proliferation and Welfare: A Study of the U.S. Smartphone Market (August 18, 2016). NET Institute Working Paper No. 14-14, Available at SSRN: https://ssrn.com/abstract=2506423 or http://dx.doi.org/10.2139/ssrn.2506423

Ying Fan (Contact Author)

University of Michigan ( email )

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HOME PAGE: http://www-personal.umich.edu/~yingfan/

Chenyu Yang

University of Maryland - Department of Economics ( email )

United States

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