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Multi-product firms and gains from trade through intra-firm adjustments

Author

Listed:
  • Michael Irlacher

    (University of Munich, CESifo)

Abstract

This paper investigates welfare gains associated with trade induced adjustments within multi-product firms. To disentangle the welfare gains, I focus on two distinct channels: investments in i) product variety and ii) the degree of product differentiation. Trade integration enables firms to exploit economies of scale in innovation and induces more investments in product scope. To reduce cannibalization among varieties, multi-product firms have incentives to invest in the degree of differentiation. I show how variety loving consumers benefit from a wider and more diversified product range.

Suggested Citation

  • Michael Irlacher, 2018. "Multi-product firms and gains from trade through intra-firm adjustments," Economics Bulletin, AccessEcon, vol. 38(4), pages 2266-2272.
    • Handle: RePEc:ebl:ecbull:eb-17-00822
    as

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    File URL: http://www.accessecon.com/Pubs/EB/2018/Volume38/EB-18-V38-I4-P206.pdf
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    References listed on IDEAS

    as
    1. Eckel, Carsten & Iacovone, Leonardo & Javorcik, Beata & Neary, J. Peter, 2015. "Multi-product firms at home and away: Cost- versus quality-based competence," Journal of International Economics, Elsevier, vol. 95(2), pages 216-232.
    2. Lisandra Flach & Michael Irlacher, 2018. "Product versus Process: Innovation Strategies of Multiproduct Firms," American Economic Journal: Microeconomics, American Economic Association, vol. 10(1), pages 236-277, February.
    3. Swati Dhingra, 2013. "Trading Away Wide Brands for Cheap Brands," American Economic Review, American Economic Association, vol. 103(6), pages 2554-2584, October.
    4. Paula Bustos, 2011. "Trade Liberalization, Exports, and Technology Upgrading: Evidence on the Impact of MERCOSUR on Argentinian Firms," American Economic Review, American Economic Association, vol. 101(1), pages 304-340, February.
    5. Lin, Ping & Saggi, Kamal, 2002. "Product differentiation, process R&D, and the nature of market competition," European Economic Review, Elsevier, vol. 46(1), pages 201-211, January.
    Full references (including those not matched with items on IDEAS)

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    Cited by:

    1. Michael Irlacher, 2022. "Multi-product Firms in International Economics," Economics working papers 2022-01, Department of Economics, Johannes Kepler University Linz, Austria.

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    More about this item

    Keywords

    Multi-product firms; Gains from trade; R&D; Cannibalization effect; Product differentiation;
    All these keywords.

    JEL classification:

    • F1 - International Economics - - Trade
    • L2 - Industrial Organization - - Firm Objectives, Organization, and Behavior

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