Essays in Industrial Organisation

Abstract

This thesis contains three essays in Industrial Organisation. The first two are united by a common theme: the role of bounded rationality in shaping market behaviour. In Chapter 2, we provide a novel explanation of the relationship between product quality and variety. We develop a theoretical model with nearly rational consumers who randomize among all alternatives that yield the same utility for them but can mistakenly choose a slightly worse alternative. We show that a firm price discriminates more effectively if it offers more varieties of its higher-quality, more-profitable, products. When the market is thin at the very top quality level, the number of varieties first increases and then..