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A Product Line Life Cycle Model of Intra-industry Trade

  • William Milberg
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    This paper develops a technology-gap model of intraindustry trade in oligopoly industries with megacorp pricing. Firms maximize market share by choosing available products in the product line. They produce subject to a product life cycle and a constraint that the markup over average costs must be sufficient to generate funds for investment in capacity replacement, capacity expansion to meet market growth, and for product innovation. The argument shows that research and development expenditures are a necessary form of ongoing investment, not a discretionary item as is implicit in much of the literature on the theory of the firm.

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    File URL: http://college.holycross.edu/RePEc/eej/Archive/Volume14/V14N4P389_397.pdf
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    Article provided by Eastern Economic Association in its journal Eastern Economic Journal.

    Volume (Year): 14 (1988)
    Issue (Month): 4 (Oct-Dec)
    Pages: 389-397

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    Handle: RePEc:eej:eeconj:v:14:y:1988:i:4:p:389-397
    Contact details of provider: Postal: c/o Dr. Alexandre Olbrecht, The Anisfield School of Business 205, Ramapo College, 505 Ramapo Valley Road, Ramapo, New Jersey 07430, USA
    Phone: (201) 684-7346
    Web page: http://www.ramapo.edu/eea/journal.html
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    1. Gary Hufbauer, 1970. "The Impact of National Characteristics & Technology on the Commodity Composition of Trade in Manufactured Goods," NBER Chapters, in: The Technology Factor in International Trade, pages 145-231 National Bureau of Economic Research, Inc.
    2. Krugman, Paul, 1980. "Scale Economies, Product Differentiation, and the Pattern of Trade," American Economic Review, American Economic Association, vol. 70(5), pages 950-59, December.
    3. Ethier, Wilfred, 1979. "Internationally decreasing costs and world trade," Journal of International Economics, Elsevier, vol. 9(1), pages 1-24, February.
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