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Multiplant strategy under core-periphery structure

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  • Tsubota, Kenmei

Abstract

A typical implicit assumption on monopolistic competition models for trade and economic geography is that firms can produce and sell only at one place. This paper fallows endogenous determination of the number of plants in a new economic geography model and examine the stable outcomes of organization choice between single-plant and multi-plant in two regions. We explicitly consider the firms' trade-off between larger economies of scale under single plant configuration and the saving in interregional transport costs under multi-plant configuration. We show that organization change arises under decreasing transportation costs and observe several organization configurations under a generalized cost function.

Suggested Citation

  • Tsubota, Kenmei, 2012. "Multiplant strategy under core-periphery structure," IDE Discussion Papers 346, Institute of Developing Economies, Japan External Trade Organization(JETRO).
    • Handle: RePEc:jet:dpaper:dpaper346
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    More about this item

    Keywords

    Industrial management; Business enterprises; Multi-plant firms; Transaction costs; New economic geography;
    All these keywords.

    JEL classification:

    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • L23 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Organization of Production
    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)

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