A Product Line Life Cycle Model of Intra-industry Trade

William Milberg

Eastern Economic Journal, 1988, vol. 14, issue 4, 389-397

Abstract: This paper develops a technology-gap model of intraindustry trade in oligopoly industries with megacorp pricing. Firms maximize market share by choosing available products in the product line. They produce subject to a product life cycle and a constraint that the markup over average costs must be sufficient to generate funds for investment in capacity replacement, capacity expansion to meet market growth, and for product innovation. The argument shows that research and development expenditures are a necessary form of ongoing investment, not a discretionary item as is implicit in much of the literature on the theory of the firm.

Date: 1988
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Persistent link: https://EconPapers.repec.org/RePEc:eej:eeconj:v:14:y:1988:i:4:p:389-397

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