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Multi-Product Firms and Flexible Manufacturing in the Global Economy

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  • Carsten Eckel
  • J. Peter Neary

Abstract

We present a new model of multi-product firms (MPFs) and flexible manufacturing, and explore its implications in partial and general oligopolistic equilibrium. Globalization affects the scale and scope (or intensive margin and intra-firm extensive margin) of MPFs through a competition effect and a demand effect. The model highlights a new source of gains from trade: productivity increases as firms become "leaner and meaner", concentrating on their core competence; but also a new source of losses from trade: product variety may fall. Our results also hold under free entry, which allows in addition for adjustment along the traditional inter-firm extensive margin. Copyright , Wiley-Blackwell.

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File URL: http://hdl.handle.net/10.1111/j.1467-937X.2009.00573.x
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Bibliographic Info

Article provided by Oxford University Press in its journal The Review of Economic Studies.

Volume (Year): 77 (2010)
Issue (Month): 1 ()
Pages: 188-217

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Handle: RePEc:oup:restud:v:77:y:2010:i:1:p:188-217

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  1. Andrew B. Bernard & Stephen J. Redding & Peter K. Schott, 2006. "Multi-Product Firms and Trade Liberalization," NBER Working Papers 12782, National Bureau of Economic Research, Inc.
  2. NORMAN, George & THISSE, Jacques-François, 1996. "Technology choice and market structure : strategic aspects of flexible manufacturing," CORE Discussion Papers, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) 1996059, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  3. Curtis Eaton, B. & Schmitt, N., 1991. "Flexible Manufacturing and Market Structure," Papers, Tasmania - Department of Economics 1991-02, Tasmania - Department of Economics.
  4. Christian Broda & David E. Weinstein, 2006. "Globalization and the Gains from Variety," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 121(2), pages 541-585, May.
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  6. Eckel, Carsten, 2009. "International trade, flexible manufacturing, and outsourcing," Munich Reprints in Economics, University of Munich, Department of Economics 20531, University of Munich, Department of Economics.
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  9. Ottaviano, G.I.P. & Thisse, J.-F., 1999. "Monopolistic Competition, Multiproduct Firms and Optimum Product Diversity," Economics Working Papers, European University Institute eco99/31, European University Institute.
  10. David P. Myatt & Justin P. Johnson, 2002. "Multiproduct Quality Competition: Fighting Brands and Product Line Pruning," Economics Series Working Papers, University of Oxford, Department of Economics 105, University of Oxford, Department of Economics.
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  12. James Brander & Jonathan Eaton, 1982. "Product Line Rivalry," Working Papers, Queen's University, Department of Economics 519, Queen's University, Department of Economics.
  13. David P. Myatt & Justin P. Johnson, 2005. "Multiproduct Cournot Oligopoly," Economics Series Working Papers, University of Oxford, Department of Economics 145, University of Oxford, Department of Economics.
  14. Volker Grossmann, 2003. "Firm Size and Diversification: Asymmetric Multiproduct Firms under Cournot Competition," CESifo Working Paper Series, CESifo Group Munich 1047, CESifo Group Munich.
  15. John Baldwin & Wulong Gu, 2009. "The Impact of Trade on Plant Scale, Production-Run Length and Diversification," NBER Chapters, National Bureau of Economic Research, Inc, in: Producer Dynamics: New Evidence from Micro Data, pages 557-592 National Bureau of Economic Research, Inc.
  16. Milgrom, Paul & Roberts, John, 1990. "The Economics of Modern Manufacturing: Technology, Strategy, and Organization," American Economic Review, American Economic Association, American Economic Association, vol. 80(3), pages 511-28, June.
  17. Jiandong Ju, 2003. "Oligopolistic Competition, Technology Innovation, and Multiproduct Firms," Review of International Economics, Wiley Blackwell, Wiley Blackwell, vol. 11(2), pages 346-359, 05.
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