Firm Size and Diversification: Asymmetric Multiproduct Firms under Cournot Competition
Volker Grossmann ()
No 1047, CESifo Working Paper Series from CESifo Group Munich
A positive relationship between firm size and product diversification is a long-standing stylized fact. However, so far there is no appropriate theoretical model to explain the underlying forces of this observation. This paper analyzes an oligopoly model with asymmetric multiproduct frms, which is capable of addressing this issue. The model suggests that intangible assets of firms, which affect marginal costs or perceived quality of goods within a firm’s product line, play a key role for the empirical regularity that larger firms are more diversified.
Keywords: asymmetric equilibrium; diversification; firm size; intangible assets; multiproduct firms (search for similar items in EconPapers)
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