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Relationship-specific Investment as a Barrier to Entry

Author

Listed:
  • Hiroshi Kitamura

    (Faculty of Economics, Kyoto Sangyo University)

  • Akira Miyaoka

    (Graduate School of Economics, Osaka University)

  • Misato Sato

    (Department of Economics, The George Washington University)

Abstract

In this paper, we construct an interregional trade model that has en- dogenous fertility rates in the manner of Helpman and Krugman (1985). The presented model shows that fertility rates in a large region become lower than those in a small region because of the agglomeration of man- ufacturing firms in the former. The agglomeration of firms in a region lowers the relative price of manufactured goods to child rearing costs, which raises the fertility rates. We also find that a decline in transportation costs results in the ag- glomeration of manufacturing firms, which lowers fertility rates in both large and small regions. Finally, we extend our two-region model to a multi-region model and find that the number of manufacturing firms in larger regions is always greater than that in smaller regions, meaning that fertility rates in the former are always lower than those in the latter.

Suggested Citation

  • Hiroshi Kitamura & Akira Miyaoka & Misato Sato, 2013. "Relationship-specific Investment as a Barrier to Entry," Discussion Papers in Economics and Business 13-24, Osaka University, Graduate School of Economics.
    • Handle: RePEc:osk:wpaper:1324
    as

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    File URL: http://www2.econ.osaka-u.ac.jp/library/global/dp/1324.pdf
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    References listed on IDEAS

    as
    1. Milgrom, Paul & Roberts, John, 1982. "Limit Pricing and Entry under Incomplete Information: An Equilibrium Analysis," Econometrica, Econometric Society, vol. 50(2), pages 443-459, March.
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Vertical Relation; Entry Deterrence; Relationship-Specific Investment; Switch- ing Costs;
    All these keywords.

    JEL classification:

    • L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies
    • L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices
    • L42 - Industrial Organization - - Antitrust Issues and Policies - - - Vertical Restraints; Resale Price Maintenance; Quantity Discounts

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