"Assortment Size and Performance of Online Sellers: An Inverted U-Shaped Relationship"

This paper investigates the role of assortment size in sellers' performance in the e-commerce context, which has been primarily associated with lowered search costs and switching costs. However, in contrast to the findings in the literature, our theoretical analysis postulates an inverted U-shaped association, showing that performance of online sellers increases and then decreases as the assortment size becomes larger. The nonlinear effect can be effectively explained by the interplay between the benefits derived from simultaneous consumer utility and the liabilities derived from the competition-intensifying effect. Additionally, the optimal level of assortment size is reduced when market density or product uncertainty is high. Using a data set of 10,000 online sellers from a large e-commerce platform, our hypotheses concerning the inverted U-shaped curve and moderation effects of market density and product uncertainty are statistically supported. Our research contributes to the assortment literature by revealing the special effects of assortment size in the online retailing context, and provides practical implications for online sellers' assortment planning and optimization under both general settings and specific conditions.