Competition, Product Proliferation, and Welfare: A Study of the US Smartphone Market

摘要

In this paper, we study how oligopolistic competition impacts product offerings in the US smartphone market. To this end, we develop and estimate a model for the demand and supply of smartphones. We first conduct counterfactual simulations in which we add or remove products to determine whether there are too few or too many products in the market. We then use merger simulations to study the effects of competition on product offerings, prices, and overall welfare. Our findings suggest that there are too few products in the market and that a reduction in competition decreases product number and product variety and reduces total welfare. These results suggest that the welfare effect of a merger may be worse when we take into account the effect of a merger on product choice.