*This paper is based on chapter 3 of my doctoral dissertation. For advice and guidance at various stages of this project I am grateful to Michael Mazzeo, Robert Porter and Asher Wolinsky. Thanks for comments are also due to David Barth, Avi Goldfarb, Shane Greenstein, Ithai Lurie, Brian Viard and Robert Vigfusson, to the Editor and anonymous referees, and to seminar participants at Northwestern, Kyoto IER, Tokyo, Texas, Melbourne, Analysis Group and the 2004 IIOC and NASMES conferences. Financial support is gratefully acknowledged from a Northwestern University Graduate School Graduate Research Grant and from the University's Centre for the Study of Industrial Organization. All errors herein are my responsibility.
PRODUCT VARIETY AND COMPETITION IN THE RETAIL MARKET FOR EYEGLASSES*
Article first published online: 19 MAY 2009
© 2009 The Authors. Journal compilation © 2009 Blackwell Publishing Ltd. and the Editorial Board of The Journal of Industrial Economics
The Journal of Industrial Economics
Volume 57, Issue 2, pages 217–251, June 2009
How to Cite
WATSON, R. (2009), PRODUCT VARIETY AND COMPETITION IN THE RETAIL MARKET FOR EYEGLASSES. The Journal of Industrial Economics, 57: 217–251. doi: 10.1111/j.1467-6451.2009.00381.x
†Author's affiliation: Department of Economics, University of Texas at Austin, 1 University Station C3100, Austin, Texas, 78712 U.S.A. e-mail:email@example.com
- Issue published online: 19 MAY 2009
- Article first published online: 19 MAY 2009
I use original data on eyewear retailers in a cross-section of U.S. markets to study how firms' product range choices vary with the degree of local competition. Market level regressions show average per firm variety declining in the number of rivals. In regressions at the firm level, taking account of spatial differentiation within each market, a non-monotonic relationship between product ranges and competition is apparent. As the number of nearby rivals increases, per firm variety may first rise before eventually declining. Explanations for this pattern are offered, in terms of a tradeoff between business stealing and clustering effects.