, Volume 7, Issue 2, pp 105-146

First online:

Beyond plain vanilla: Modeling joint product assortment and pricing decisions

  • Michaela DraganskaAffiliated withGraduate School of Business, Stanford University Email author 
  • , Michael MazzeoAffiliated withKellogg School of Management, Northwestern University
  • , Katja SeimAffiliated withWharton School of Business, University of Pennsylvania

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This paper investigates empirically the product assortment strategies of oligopolistic firms. We develop a framework that integrates product choice and price competition in a differentiated product market. The present model significantly improves upon the reduced-form profit functions typically used in the entry and location choice literature, because the variable profits that enter the product-choice decision are derived from a structural model of demand and price competition. Given the heterogeneity in consumers’ product valuations and responses to price changes, this is a critical element in the analysis of product assortment decisions. Relative to the literature on structural demand models, our results show that incorporating endogenous product choice is essential for policy simulations and may entail very different conclusions from settings where product assortment choices are held fixed.


Product assortment decisions Multi-product firms Discrete games

JEL Classification

L0 L1 L2 L8 M3