Is Tom Cruise Threatened? An Empirical Study of the Impact of Product Variety on Demand Concentration

摘要

Multiple studies suggested that expanding product variety due to adoption of the Internet will satisfy consumer's increasingly heterogeneous tastes, thus causing the so called Long Tail effect (i.e., increasing demand for niche products). In this paper we empirically examine the impact of product variety on demand concentration. We use two large data sets from the movie rental industry and analyze the data at both movie level and consumer-level. We employ multiple measures to understand the changing demand concentration and incorporate the potential endogeneity of product variety. Multiple models analyzed in our study consistently suggest that larger product variety is likely to increase the demand for hits and decrease the demand for niche products. We propose that new products appear much faster than consumers discover them. Finally, we find no evidence that niche titles satisfy consumer tastes any better than popular titles and that a small number of heavy users are more likely to venture into niches than light users.