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The Impact of Market Scale on Standardization and Specialization

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  • Waka Cheung
  • Yew-Kwang Ng

Abstract

A Hotelling long-run equilibrium model based on the microeconomics of optimization is developed to analyze the impact of market scale on specialization and standardization. Among our conclusions is that the degree of vertical division of labour and the number of varieties produced in a production line increase, via a rise in the extent of market with population, average income and market transaction efficiency; however, the opposite effects also result from a rise in average income via the preference for individualized products. The net effect of average income varies in different cases. Using these conclusions we explain some phenomena in the garment and auto industries.

Suggested Citation

  • Waka Cheung & Yew-Kwang Ng, 2013. "The Impact of Market Scale on Standardization and Specialization," Studies in Microeconomics, , vol. 1(2), pages 243-266, December.
    • Handle: RePEc:sae:miceco:v:1:y:2013:i:2:p:243-266
    DOI: 10.1177/2321022213501262
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    References listed on IDEAS

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