Market access and competition in product lines

We analyze competition in product lines by multi-product oligopolists that have preferential access to a local market but can supply a rival's market by incurring distance costs. We show that the width and degree of overlap in the product lines is greater in large markets and when the products are more differentiated. Distance costs affect not only the firms' product lines but also firms' choices of the products that are to be supplied to the distant market. Product lines are broader and more overlapped when distance costs are low and when they are high; while product lines are narrower, with less overlap, when distance costs are moderate. Consumers generally gain and firms lose from a reduction in distance costs. However, consumers may lose and firms gain from reduced distance costs if these lead to firms adopting narrower product lines. (c) 2012 Elsevier B.V. All rights reserved.