Group consumption and product diversity: the case of smoking bans

Foucart, Renaud

Abstract

I study product diversity in the presence of search costs and groups of consumers. Groups with heterogeneous tastes create a leverage effect on competition: a large majority of firms may end up offering a product that corresponds to the taste of the minority. I illustrate this idea with smoking bans in bars and restaurants. When the first nonsmoking restaurants opened, there were few of them with little competition and high market power on nonsmokers. By extracting a large surplus from nonsmokers, nonsmoking restaurants became unattractive to other groups, while smoking restaurants were plenty and competitive, attracting both smokers and mixed groups.

Citation

Foucart, R. (2017). Group consumption and product diversity: the case of smoking bans. Journal of Industrial Economics, 65(3), 559-584. https://doi.org/10.1111/joie.12137

• Journal Article Type: Article
• Acceptance Date: Dec 21, 2016
• Online Publication Date: Oct 23, 2017
• Publication Date: Sep 30, 2017
• Deposit Date: Feb 7, 2018
• Publicly Available Date: Oct 1, 2018
• Journal: Journal of Industrial Economics
• Print ISSN: 0022-1821
• Electronic ISSN: 1467-6451
• Publisher: Wiley
• Peer Reviewed: Peer Reviewed
• Volume: 65
• Issue: 3
• Pages: 559-584
• DOI: https://doi.org/10.1111/joie.12137
• Public URL: https://nottingham-repository.worktribe.com/output/885564
• Publisher URL: https://doi.org/10.1111/joie.12137
• Additional Information: This is the peer reviewed version of the following article: Foucart, R. (2017), Group Consumption and Product Diversity: The Case of Smoking Bans. J Ind Econ, 65: 559–584. doi:10.1111/joie.12137, which has been published in final form at https://doi.org/10.1111/joie.12137. This article may be used for non-commercial purposes in accordance with Wiley Terms and Conditions for Self-Archiving.
• Contract Date: Feb 7, 2018