Heterogeneous firms and cost sharing in China's marketplaces

Ding Ke, Gokan Toshitaka and Zhu Xiwei

No 582, IDE Discussion Papers from Institute of Developing Economies, Japan External Trade Organization(JETRO)

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.

Keywords: China; Business enterprises; Costs; Econometric model; Market; Heterogeneous firms; Marketplace; Cost sharing; Multiplicity (search for similar items in EconPapers)
JEL-codes: D04 R12 (search for similar items in EconPapers)
Date: 2016-03-01
New Economics Papers: this item is included in nep-cna and nep-cse
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Published in IDE Discussion Paper = IDE Discussion Paper, No. 582. 2016-03-01

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