Portal de Periódicos da CAPES

Hitting the jackpot: Product proliferation by multiproduct firms under uncertainty

1988; Elsevier BV; Volume: 6; Issue: 4 Linguagem: Inglês

10.1016/s0167-7187(88)80004-3

1873-7986

Ruth S. Raubitschek,

Digital Platforms and Economics

This paper presents a model of product proliferation by multiproduct firms under uncertainty. Firms introduce new differentiated products because they want to hit as many jackpots as possible - products with high profits and long lives. There is uncertainty about the success of new products. As the probability of hitting a jackpot increases, product proliferation increases: more products are introduced and expected in equilibrium. The expected number of products in equilibrium is always less than at the optimum. But, in industries with multiple firms, as the probability of hitting a jackpot increases, rivalry intensifies and that gap shrinks.