Existing theory poorly describes the product diversity in a modern market economy largely because such theory is founded on an inadequate concept of equilibrium. Standard analysis regards decision makers as naive in their anticipations of the response of rivals to their decisions and neglects...

When demand is stochastic, a monopoly offering several product varieties, each at a preannounced price, can profitably discriminate in price if nonprice rationing mechanisms, such as queuing or reservations, can determine the order in which consumers are served. But in such circumstances the...