Abstract
I investigate changes in firms’ product scope using the Nielsen Retail Scanner data of U.S. consumer goods purchases for 2007-2014. The changes of firms’ product scope are procyclical on average, and the larger the firm size the smaller the reduction in product scope in the Great Recession. In a model of heterogeneous oligopolistic multiproduct firms, I show that such product scope changes endogenously decrease aggregate output and increase aggregate price in a recession, by decreasing the total number of products and by increasing markups.
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