Mrázová, Monika and Neary, J. Peter (2012) Selection effects with heterogeneous firms. CEP Discussion Papers (CEPDP1174). London School of Economics and Political Science. Centre for Economic Performance, London, UK.
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Abstract
We provide a general characterization of which firms will select alternative ways of serving a market. If and only if firms' maximum profits are supermodular in production and marketaccess costs, more efficient firms will select into the activity with lower market-access costs. Our result applies in a range of models and under a variety of assumptions about market structure. We show that supermodularity holds in many cases but not in all. Exceptions include FDI (both horizontal and vertical) when demands are “sub-convex” (i.e., less convex than CES), fixed costs that vary with access mode, and R&D with threshold effects.
| Item Type: | Monograph (Discussion Paper) |
|---|---|
| Official URL: | http://cep.lse.ac.uk/_new/publications/series.asp?... |
| Additional Information: | © 2012 The Authors |
| Divisions: | Centre for Economic Performance |
| Subjects: | H Social Sciences > HF Commerce |
| JEL classification: | F - International Economics > F1 - Trade > F12 - Models of Trade with Imperfect Competition and Scale Economies F - International Economics > F1 - Trade > F15 - Economic Integration F - International Economics > F2 - International Factor Movements and International Business > F23 - Multinational Firms; International Business |
| Date Deposited: | 07 Aug 2013 15:15 |
| Last Modified: | 13 Sep 2024 20:22 |
| URI: | http://eprints.lse.ac.uk/id/eprint/51521 |
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