Concentration, Product Variety, and Entry‐For‐Merger: Evidence from New Product Introductions in the U.S. Food Industry

17 Pages Posted: 16 Apr 2020

See all articles by Haimanti Bhattacharya

Haimanti Bhattacharya

University of Utah

Robert Innes

University of California, Merced

Date Written: October 2016

Abstract

Competing theories in industrial organization predict that more concentrated industries will lead to a smaller and more efficient variety of products or, alternately, a larger and less efficient array of products. This paper presents an empirical study of these competing implications that estimates the impact of market concentration on new product introductions in a panel of nine food processing industries over 1983 to 2004. Controlling for industry‐level unobservables (using fixed effects) and endogeneity of industry market structure, we find that industry concentration promotes the introduction of new products. Preliminary evidence also suggests that new product introductions spur subsequent food industry mergers. Both conclusions are consistent with the “entry‐for‐merger” theory of product variety wherein atomistic innovators introduce new products in anticipation of profitable future mergers with concentrated firms.

Keywords: Market concentration, mergers, new product introductions

Suggested Citation

Bhattacharya, Haimanti and Innes, Robert, Concentration, Product Variety, and Entry‐For‐Merger: Evidence from New Product Introductions in the U.S. Food Industry (October 2016). American Journal of Agricultural Economics, Vol. 98, Issue 5, pp. 1360-1376, 2016, Available at SSRN: https://ssrn.com/abstract=3577015 or http://dx.doi.org/10.1093/ajae/aaw070

Haimanti Bhattacharya (Contact Author)

University of Utah ( email )

Department of Economics
1645 E Campus Center Drive, #308
Salt Lake City, UT 84112
United States

HOME PAGE: http://www.econ.utah.edu/~bhattacharya

Robert Innes

University of California, Merced ( email )

P.O. Box 2039
Merced, CA 95344
United States

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