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Concentration, Product Variety, and Entry‐for‐Merger: Evidence from New Product Introductions in the U.S. Food Industry
Author(s) -
Bhattacharya Haimanti,
Innes Robert
Publication year - 2016
Publication title -
american journal of agricultural economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.949
H-Index - 111
eISSN - 1467-8276
pISSN - 0002-9092
DOI - 10.1093/ajae/aaw070
Subject(s) - endogeneity , variety (cybernetics) , product (mathematics) , industrial organization , anticipation (artificial intelligence) , food industry , product differentiation , business , product proliferation , market concentration , food products , empirical evidence , new product development , dairy industry , marketing , economics , market structure , econometrics , microeconomics , food science , product management , computer science , mathematics , philosophy , chemistry , geometry , epistemology , artificial intelligence , cournot competition
Competing theories in industrial organization predict that more concentrated industries will lead to a smaller and more efficient variety of products or, alternately, a larger and less efficient array of products. This paper presents an empirical study of these competing implications that estimates the impact of market concentration on new product introductions in a panel of nine food processing industries over 1983 to 2004. Controlling for industry‐level unobservables (using fixed effects) and endogeneity of industry market structure, we find that industry concentration promotes the introduction of new products. Preliminary evidence also suggests that new product introductions spur subsequent food industry mergers. Both conclusions are consistent with the “entry‐for‐merger” theory of product variety wherein atomistic innovators introduce new products in anticipation of profitable future mergers with concentrated firms.