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Not So Demanding: Demand Structure and Firm Behavior

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  • Neary, Peter
  • Mrázová, Monika

Abstract

We show that any well-behaved demand function can be represented by its demand manifold, a smooth curve which relates the elasticity and convexity of demand. This manifold is a sufficient statistic for many comparative statics questions; leads naturally to characterizations of new families of demand functions which nest most of those used in applied economics; and connects assumptions about demand structure with firm behavior and economic performance. In particular, we show that the demand manifold leads to new insights about industry adjustment with heterogeneous firms, and provides a quantitative framework for measuring the effects of globalization.

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  • Neary, Peter & Mrázová, Monika, 2016. "Not So Demanding: Demand Structure and Firm Behavior," CEPR Discussion Papers 11119, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:11119
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    More about this item

    Keywords

    Heterogeneous firms; Pass-through; Quantifying responses to trade liberalization; Super- and sub-convexity; Supermodularity;
    All these keywords.

    JEL classification:

    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • F15 - International Economics - - Trade - - - Economic Integration
    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation

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