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Not So Demanding: Demand Structure and Firm Behavior

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  • Mrazova, Monika
  • Neary, J Peter

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.

Suggested Citation

  • Mrazova, Monika & Neary, J Peter, 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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    Cited by:

    1. Rick van der Ploeg, 2017. "Race to Burn the Last Ton of Carbon and the Risk of Stranded Assets," CESifo Working Paper Series 6793, CESifo Group Munich.
    2. Barbara Annicchiarico & Enrico Marvasi, 2018. "Protection for Sale with Price Interactions and Incomplete Pass-Through," Working Papers LuissLab 18141, Dipartimento di Economia e Finanza, LUISS Guido Carli.
    3. Barbara Annicchiarico & Enrico Marvasi, 2018. "Protection for Sale with Price Interactions and Incomplete Pass-Through," CEIS Research Paper 435, Tor Vergata University, CEIS, revised 08 Jun 2018.
    4. Irlacher, Michael & Unger, Florian, 2018. "Effective tax rates, endogenous mark-ups and heterogeneous firms," Discussion Papers in Economics 49717, University of Munich, Department of Economics.
    5. Thomas Eichner & Gilbert Kollenbach & Mark Schopf, 2018. "Demand versus Supply Side Climate Policies with a Carbon Dioxide Ceiling," Volkswirtschaftliche Diskussionsbeiträge 185-18, Universität Siegen, Fakultät Wirtschaftswissenschaften, Wirtschaftsinformatik und Wirtschaftsrecht.

    More about this item

    Keywords

    Heterogeneous Firms; Pass-Through; Quantifying Responses to Trade Liberalization; Super- and Sub-Convexity; Supermodularity;

    JEL classification:

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

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