Competition among large and heterogeneous small firms

Lijun Pan and Yongjin Wang

Economics Letters, 2020, vol. 196, issue C

Abstract: We extend the model of Parenti (2018) on large and small firms by introducing cost heterogeneity among small firms. We propose a novel necessary and sufficient condition for the existence of such a mixed market structure. Furthermore, in contrast to Parenti (2018), we show that in the presence of cost heterogeneity among small firms, trade liberalization may raise or reduce the mass of small firms in operation.

Keywords: Large firms; Small firms; Firm heterogeneity; Trade liberalization (search for similar items in EconPapers)
JEL-codes: D4 F11 L10 (search for similar items in EconPapers)
Date: 2020
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:196:y:2020:i:c:s0165176520303645

DOI: 10.1016/j.econlet.2020.109604

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