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Multi-product firms and gains from trade through intra-firm adjustments

Michael Irlacher ()

Economics Bulletin, 2018, vol. 38, issue 4, 2266-2272

Abstract: This paper investigates welfare gains associated with trade induced adjustments within multi-product firms. To disentangle the welfare gains, I focus on two distinct channels: investments in i) product variety and ii) the degree of product differentiation. Trade integration enables firms to exploit economies of scale in innovation and induces more investments in product scope. To reduce cannibalization among varieties, multi-product firms have incentives to invest in the degree of differentiation. I show how variety loving consumers benefit from a wider and more diversified product range.

Keywords: Multi-product firms; Gains from trade; R&D; Cannibalization effect; Product differentiation (search for similar items in EconPapers)
JEL-codes: F1 L2 (search for similar items in EconPapers)
Date: 2018-12-02
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