Business Groups and Trade in East Asia: Part 1, Networked Equilibria
We propose an economic model of business groups that allows for the cooperative behavior of groups of firms, where the number and size of each group is determined endogenously. In this framework, more than one configuration of groups can arise in equilibrium: several different types of business groups can occur, each of which is consistent with profit-maximization and is stable. This means that the economic logic does not fully determine the industrial structure, leaving scope for political and sociological factors to have a lasting influence. In a companion paper, we argue that the differing structures of business groups found in South Korea, Taiwan and Japan fit the stylized results from the model, and contrast the impact of these groups on the product variety of their country exports to the United States.
|Date of creation:||Jan 1997|
|Publication status:||Published as "Business Groups and Product Variety in Trade: Evidence from South Korea, Taiwan, and Japan", Journal of International Economics, Vol. 47, no. 2 (April 1999).|
|Contact details of provider:|| Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.|
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- Ariel Pakes & Paul McGuire, 1994.
"Computing Markov-Perfect Nash Equilibria: Numerical Implications of a Dynamic Differentiated Product Model,"
RAND Journal of Economics,
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