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Cover for Mergers between Multi-Product Firms with Endogenous Variety: Theory and an Application to the Ready-To-Eat Cereal Industry
dc.contributor.advisorRust, John P
dc.creator
dc.date.accessioned2020-06-30T13:29:50Z
dc.date.available2020-06-30T13:29:50Z
dc.date.created2020
dc.date.issued
dc.date.submitted01/01/2020
dc.identifier.uri
dc.descriptionPh.D.
dc.description.abstractWhen multi-product firms endogenously choose their product variety, mergers can have welfare effects that go well beyond their immediate impact through prices. The structural models needed to quantify these effects, however, quickly become computationally intractable as the number of products grows. In this paper, I propose a dynamic structural model of multi-product firms and endogenous product variety that bypasses this dimensionality problem. I show that, under a nested logit demand assumption, firms introduce/remove products in a pre-determined order. As a result, the number of products each firm supplies is a sufficient statistic for the identity of the products themselves and, therefore, for all market outcomes and firms’ continuation strategies. I use this result to argue that the strategies and states that need to be considered to solve the model are a small fraction of the whole strategy set and state space, making it possible to estimate the model using standard techniques in structural econometrics. I apply the model to the Ready-To-Eat Cereal Industry and use it to simulate a hypothetical merger between two large players. Results show that ignoring endogenous product variety leads to a 30% overestimation of the post-merger number of products and a 19% underestimation of consumer welfare loss.
dc.formatPDF
dc.format.extent121 leaves
dc.languageen
dc.publisherGeorgetown University
dc.sourceGeorgetown University-Graduate School of Arts & Sciences
dc.sourceEconomics
dc.subjectDynamic Discrete Games
dc.subjectEndogenous Products
dc.subjectMergers
dc.subject.lcshEconomics
dc.subject.otherEconomics
dc.titleMergers between Multi-Product Firms with Endogenous Variety: Theory and an Application to the Ready-To-Eat Cereal Industry
dc.typethesis
dc.identifier.orcid0000-0002-3332-9561


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