Consumer-Benefiting Transport Costs: The Role of Product Innovation in a Vertical Structure

Takauchi Kazuhiro () and Tomomichi Mizuno
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Takauchi Kazuhiro: Faculty of Business and Commerce, Kansai University, 3-3-35 Yamate-cho, Suita, Osaka 564-8680, Japan

The B.E. Journal of Theoretical Economics, 2024, vol. 24, issue 2, 661-690

Abstract: We examine the effects of reduced transport costs on a firm’s horizontal product innovation activity and consumer welfare. It is well established that trade liberalization, including reducing transport costs, could enable innovative practices and make consumers better off. Trade theory, in particular, commonly asserts that zero transport costs maximize consumer surplus. In contrast, we demonstrate that (i) reduced transport costs can enhance a firm’s incentives for investment; however, (ii) positive transport costs (trade barrier) can maximize consumer surplus.

Keywords: transport costs; consumer surplus; horizontal product innovation (search for similar items in EconPapers)
JEL-codes: F12 L13 O31 (search for similar items in EconPapers)
Date: 2024
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Related works:
Working Paper: Consumer-benefiting transport cost: The role of product innovation in a vertical structure (2020)
Working Paper: Consumer-benefiting transport cost: The role of product innovation in a vertical structure (2019)
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DOI: 10.1515/bejte-2024-0068

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