The Impact of Quality and Variety on Product Assortment Decisions: An Empirical Investigation

We study the use of variety and quality of a product line as strategic tools, and specifically the link between quality and the composition of product assortments. We observe that individual stores offer assortments such that the same ice cream flavors from brands within the same quality tier do not appear on store shelves at the same time. This suggests that retailers may use flavor selection as a tool to reduce inter-brand competition within quality tiers. Using the ice cream category data, we analyze the assortments offered by stores and the effect of the assortments offered on prices, sales and competition.