Relationship-specific Investment as a Barrier to Entry
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.
|Date of creation:||Sep 2013|
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- Wright, Julian, 2008. "Naked exclusion and the anticompetitive accommodation of entry," Economics Letters, Elsevier, vol. 98(1), pages 107-112, January.
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"Limit Pricing and Entry under Incomplete Information: An Equilibrium Analysis,"
Econometric Society, vol. 50(2), pages 443-459, March.
- Paul Milgrom & John Roberts, 1998. "Limit Pricing and Entry Under Incomplete Information: An Equilibrium Analysis," Levine's Working Paper Archive 245, David K. Levine.
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