Working Paper: CEPR ID: DP10324
Authors: Simon P. Anderson; Levent Celik
Abstract: We characterize the product line choice and pricing of a monopolist as the upper envelope of net marginal revenue curves to the individual product demand functions. The equilibrium product varieties to include in a product line are those yielding the highest upper envelope. In a central case (corresponding to a generalized vertical differentiation framework), the equilibrium range of varieties is exactly the same as the first-best socially optimal range. These upper envelope and first-best optimal range findings extend to a symmetric Cournot oligopoly as well.
Keywords: Cournot; Multiproduct Competition; Product Differentiation; Product Line Design; Product Line Pricing; Second-Degree Price Discrimination
JEL Codes: L12; L13; L15
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Product line design (L23) | Pricing strategies (D49) |
| Upper envelope of marginal revenue curves (D43) | Pricing strategies (D49) |
| Equilibrium product varieties (D51) | Pricing strategies (D49) |
| Equilibrium range of varieties (D50) | Socially optimal range (D69) |
| Monopolist's choices (D42) | Socially optimal outcomes (D69) |
| Product line design (L23) | Marginal revenue curves (D43) |