Relationship-specific Investment as a Barrier to Entry

Hiroshi Kitamura (), Akira Miyaoka () and Misato Sato ()
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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

No 13-24, Discussion Papers in Economics and Business from Osaka University, Graduate School of Economics

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.

Keywords: Vertical Relation; Entry Deterrence; Relationship-Specific Investment; Switch- ing Costs (search for similar items in EconPapers)
JEL-codes: L12 L41 L42 (search for similar items in EconPapers)
Pages: 46 pages
Date: 2013-09
New Economics Papers: this item is included in nep-com, nep-dem, nep-geo and nep-ind
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