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Discussion Paper Details

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Title: Product Line Design

Author(s): Simon P Anderson and Levent Celik

Publication Date: December 2014

Keyword(s): Cournot multi-product competition, product differentiation, product line design, product line pricing and second-degree price discrimination

Programme Area(s): Industrial Organization

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.

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Bibliographic Reference

Anderson, S and Celik, L. 2014. 'Product Line Design'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=10324