The Impact of Quality and Variety on Product--论文代写范文

这篇essay代写范文表明,在收入方面,零售商面临平均效用之间的权衡，每个产品提供给消费者，在多大程度上吸引不同的消费。根据替代模式,零售商可能会发现最优模式,避免提供多个品牌相同的产品。下面的paper代写范文进行论述。

Abstract 
  We study the use of variety and quality of a product line as strategic tools, and specifically the link between quality and the composition of product assortments. We observe that individual stores offer assortments such that the same ice cream flavors from brands within the same quality tier do not appear on store shelves at the same time. This suggests that retailers may use flavor selection as a tool to reduce inter-brand competition within quality tiers. Using the ice cream category data, we analyze the assortments offered by stores and the effect of the assortments offered on prices, sales and competition. 
Key Words: product line decisions, competitive strategy

 Introduction 
  We study firms’ use of variety and quality of their product lines as strategic tools, focusing specifically on the link between quality and the composition of product assortments. Using data on the ice cream category, we document the assortments of brands and flavors offered by stores and analyze the effect of consumer demand and substitution patterns on the variety of products included in retailersÆ assortments. Understanding these effects is of great value to retailers, for whom the product assortment problem is both very complex and very important to profitability. ManufacturersÆ choices regarding what to produce will depend critically on whether retailers find it optimal to offer their particular varieties, given the portfolios manufactured by competitors. In addition, regulators may be concerned about the effects of product variety on utility when analyzing industry mergers. 

  We use two years of data from five stores, covering 35 flavors and six brands that can be conveniently be divided among three quality tiers, each containing two brands. Two stylized facts emerge from looking at the data. First, across the stores for which we have information, higher quality brands are generally associated with larger assortments. This finding is quite surprising in light of previous research that suggests the opposite correlation would be optimal (Shugan 1989). Therefore, we carefully examine both the demand-side and the supply-side factors that may explain the positive correlation between brand quality and number of product offerings in our context. Second, individual stores offer product assortments such that the same ice cream flavors from brands within the same quality tier rarely appear on store shelves at the same time. 

  This observation suggests that retailers may use flavor selection as a tool to maximize profits by including in their product portfolios brand/flavor combinations that are not close substitutes. We begin by introducing a simple theoretical framework for analyzing the problem of flavor selection for retailers. We show that, on the revenue side, retailers face a tradeoff between the average utility that each individual product provides to consumers and the extent tow which products appeal to different subsets of the consumer population. Depending on substitution patterns, retailers may find it optimal to avoid offering multiple brands of the same flavor, particularly if the brands are from the same quality tier. 

  In addition, assortment costs or other supply side factors associated with offering particular brand/flavor combinations will influence the product selection decisions of retailers. Next, we estimate a demand system for the ice cream category. We specify utility at the brand/flavor level for each product in the dataset, and allow the effect of product characteristics to differ across consumers. Estimating such a demand system enables us to further explore the link between quality and variety by evaluating alternative explanations for retailersÆ product assortment decisions. We can evaluate how retailers may use brand/flavor selection to increase profits by introducing products with particular demand and substitution characteristics.

  Our findings also have potentially important implications for manufacturers’ competitive strategy. To the extent that demand and substitution factors explain the observed flavor selection decisions by retailers, then a manufacturerÆs strategy of offering unique flavors is right on target. Suppose, for example, that consumer preferences for different flavors of different brands tends to be more variable than for the same flavor produced by these brands. Then, by offering unique flavors, a manufacturer would maximize the chance that a profit maximizing retailer selects a large subset of its assortment. However, if the explanation is found on the supply side, quantity discounts may be the best tool to give retailers an incentive to carry more flavors from the same brand. Of course, a retailer may not choose to purchase from only one manufacturer within a tier for fear that this may give that manufacturer too much price setting power.

 The Market and Data 
  Market definition.Ice cream is one of the most popular categories in supermarkets: 92.9% of households in the United States purchase in the category (Marketing Factbook, 1993). In the general category of ice cream, there is a distinction between regular ice cream, frozen yogurt and sorbets, and ice milk1 with regular ice cream representing more than 60% of total sales. While approximately one-third of all ice cream sales is vanilla, there are literally hundreds of other flavors that have been created over the years. Fruits, nuts, candies, spices, liquors, and syrups are all used to produce a multitude of flavors.

  Market structure.Ice cream is one of the few consumer product categories in the U.S. market not dominated by a single company. The top national producer, Kraft (Breyers, Sealtest), had a 15.5% market share in 1993, followed by Dreyers with about 10%, and H¨aagen Dazs and Ben & Jerry’s with about 6% each (Market Share Reporter, Frozen Desserts, 1995). Recently, however, Unilever and Nestle have been pushing for consolidation and fighting for dominance. Unilever bought Breyers and Sealtest from Kraft in 1993, and Ben & Jerry’s in 2000. Nestle acquired H¨aagen Dazs in 1999, and in 2002 proposed to merge its ice cream operations with Dreyers. The U.S. Federal Trade Commission (FTC) has recently sought a preliminary injunction to block this merger on the grounds that it would “lead to anticompetitive effects . . . including less product variety and higher prices”.

  Data sources. In our empirical analysis we use a store-level scanner panel data set collected by Information Resources Inc. (IRI) in two contagious zip codes of a large Midwestern urban area. The data spans a 104-week period (June 1991-May 1993) and consists of weekly data on price, quantities, features, and displays for all UPCs sold in 5 stores. We focus on the six largest brands offering regular ice cream: H¨aagen Dazs, Ben & Jerry’s, Dreyers3 , Breyers, Sealtest, and Schoeps. Together, they represent about 80% of the market. We supplement the data with information on the product characteristics of the individual flavors obtained from the package labels. For products that were discontinued, we obtained data on close substitutes (e.g., Fieldcrest was used as a proxy for Sealtest, which was discontinued).(paper代写)

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