Multiproduct firms and scope adjustment in globalization

Larry Qiu and Wen Zhou

Journal of International Economics, 2013, vol. 91, issue 1, 142-153

Abstract: A model of heterogeneous firms with variety-specific fixed costs is developed and analyzed to study how multiproduct firms respond to globalization. In contrast with most existing models, the analysis demonstrates that more-productive firms may expand their product scope, which in turn may push up their average costs. A necessary and sufficient condition for scope expansion is that the fixed cost of introducing more varieties increases rapidly with the product scope. With increasing globalization, the percentage of scope-expanding firms diminishes and eventually becomes zero.

Keywords: Multiproduct firms; Globalization; Trade liberalization; Scope; Firm heterogeneity (search for similar items in EconPapers)
JEL-codes: F12 F13 F15 (search for similar items in EconPapers)
Date: 2013
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Citations: View citations in EconPapers (65)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:inecon:v:91:y:2013:i:1:p:142-153

DOI: 10.1016/j.jinteco.2013.04.006

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