financial product differentiation and fee competition in the mutual fund industry1 shujing li axa rosenberg group email sli axarosenberg com this version march 10 2005 comments are welcome abstract paper studies how much dustry increases its fees by differentiating products over state of nature to avoid head managers hold different portfolios which yield distinct returns become star funds alternatively market situations enables obtain stochas tic monopoly power on average charge higher than otherwise emperically test idea develops a structural model multi nomial iv logit with random characteristics is easier implement coefficient mixed but yields own cross price elasticities for that as sensible estimates equity increase their profits roughly 30 2 bn through novel form differ entiation terms social welfare there exists excess entry industry assuming free fixed costs 1i am deeply indebted john shoven tim bresnahan
