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

43 Pages Posted: 8 Aug 2016

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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 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 product number and product variety. These results suggest that merger policies should 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, merger, product proliferation, smartphone industry

JEL Classification: L13, L15, L41, L63

Suggested Citation

Fan, Ying and Yang, Chenyu, Competition, Product Proliferation and Welfare: A Study of the U.S. Smartphone Market (August 2016). CEPR Discussion Paper No. DP11423, Available at SSRN: https://ssrn.com/abstract=2820078

Ying Fan (Contact Author)

University of Michigan ( email )

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Ann Arbor, MI 48109-1220
United States

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

Chenyu Yang

University of Maryland - Department of Economics ( email )

United States

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