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Heterogeneous firms and cost sharing in China's marketplaces

Author

Listed:
  • Ding, Ke
  • Gokan, Toshitaka
  • Zhu, Xiwei

Abstract

This study extends Melitz's model with heterogeneous firms by introducing shared fixed costs in a marketplace. It aims to explain heterogeneous firms' choice between traditional marketplaces and modern distribution channels on the basis of their productivities. The results reveal that the co-existence of a traditional marketplace and modern distribution channels improves social welfare. In addition, a deregulation policy for firm entry outside a marketplace and accumulation of human capital are factors that contribute to improve the social welfare.

Suggested Citation

  • Ding, Ke & Gokan, Toshitaka & Zhu, Xiwei, 2016. "Heterogeneous firms and cost sharing in China's marketplaces," IDE Discussion Papers 582, Institute of Developing Economies, Japan External Trade Organization(JETRO).
    • Handle: RePEc:jet:dpaper:dpaper582
    as

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    File URL: https://ir.ide.go.jp/record/37603/files/IDP000582_001.pdf
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    References listed on IDEAS

    as
    1. Ding Ke, 2012. "Market Platforms, Industrial Clusters and Small Business Dynamics," Books, Edward Elgar Publishing, number 14950.
    2. Douglass C. North, 1991. "Institutions," Journal of Economic Perspectives, American Economic Association, vol. 5(1), pages 97-112, Winter.
    3. Dixit, Avinash K & Stiglitz, Joseph E, 1977. "Monopolistic Competition and Optimum Product Diversity," American Economic Review, American Economic Association, vol. 67(3), pages 297-308, June.
    4. Marc J. Melitz, 2003. "The Impact of Trade on Intra-Industry Reallocations and Aggregate Industry Productivity," Econometrica, Econometric Society, vol. 71(6), pages 1695-1725, November.
    Full references (including those not matched with items on IDEAS)

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    JEL classification:

    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)
    • D04 - Microeconomics - - General - - - Microeconomic Policy: Formulation; Implementation; Evaluation

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