Productivity and Strategies of Multiproduct Firms

This doctoral thesis studies how differences in productivity influence the strategies and market power of multiproduct firms. This relationship is investigated using firm-product-level data from India's pharmaceutical and fast-moving consumer goods industries, where product strategies and market power directly determine drug and food accessibility for 1.3 billion people. The three core chapters show that productivity differences exist among products both within the firm and across firms within narrowly defined markets. In the first chapter, I find that productivity differences across products persist also in markets where there are no price differences (uniform pricing), and that they drive firm strategies other than pricing, such as product pack size, discounts, availability and variety. In the second and third chapters, I show that higher productivity is related with lower product wholesale price and market power, except for the top-selling products that have higher productivity, prices and market power compared to their competitors. Overall, there is evidence that productivity triggers price and nonprice competition. However, consumers do not necessarily benefit from it since their demand is strongly influenced by the intermediation of the retailers and a misperception about product quality.