PRODUCT VARIETY AND MARKET-STRUCTURE - A NEW MEASURE AND A SIMPLE TEST

The relationship between market structure and product variety is criti cal, since too few or too many products may be produced given a partic ular market structure. This paper measures empirically the relationshi p between structure and variety in the music recording industry. Entro py is used to generate a measure of product variety. The results sugge st that the relationship is nonmonotonic: high and low levels of conce ntration result in lessened variety, and maximum variety is promoted b y a moderately concentrated structure.