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Who Can Produce What? Firm Capabilities and Product Entry

Author

Listed:
  • Luca Macedoni
  • John Morrow
  • Vladimir Tyazhelnikov

Abstract

Which firms supply which products? Modeling multi-product firms under heterogeneous markups, we recover firms' costs for produced products and develop an algorithm inspired by recommender systems to predict costs for unproduced products. Lower predicted costs imply increased product adoption and identify which firms enter when export demand rises, including firms crossing broad product classifications. We use these counterfactual costs to quantify how reductions in fixed and marginal costs induce product entry and lower price indices. In a price-stabilization exercise following a cost shock, entry subsidies can cost less than subsidies to incumbents, particularly for smaller shocks when capable potential entrants remain available.

Suggested Citation

  • Luca Macedoni & John Morrow & Vladimir Tyazhelnikov, 2026. "Who Can Produce What? Firm Capabilities and Product Entry," CESifo Working Paper Series 13044, CESifo.
    • Handle: RePEc:ces:ceswps:_13044
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    File URL: https://www.ifo.de/DocDL/cesifo1_wp13044.pdf
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    More about this item

    Keywords

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    JEL classification:

    • F1 - International Economics - - Trade
    • F6 - International Economics - - Economic Impacts of Globalization
    • D2 - Microeconomics - - Production and Organizations
    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance

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