On the social (sub)optimality of divisionalization under product differentiation

Abstract

We revisit the interplay between di §erentiation and divisionalization in a duopoly version of Ziss (1998). We model divisionalization as a discrete problem to prove that (i) firms may choose not to become multidivisional; and (ii) there may arise asymmetric outcomes in mixed strategies, due to the existence of multiple symmetric equilibria. If industry-wide divisionalization is the unique equilibrium, it can be socially e¢cient provided goods are almost perfect substitutes. Even small degrees of di §erentiation may su¢ce to make industrywide divisionalization socially desirable because of the prevalence of consumers' taste for variety over the replication of fixed costs.

The Optimal Proportion of State-Owned Shares in an Industry Chain

“…Moreover, product differentiation is necessary for enterprises to compete and satisfy increasingly diverse consumer needs (Dong et al, 2018;Saha, 2009). Although a few studies involve cost differences and product differentiation, they rarely analyze the optimal proportion of stateowned shares in mixed-ownership enterprises (Lambertini & Pignataro, 2019). What roles do cost and product differentiation play in determining the optimal balance of state-owned shares?…”