Selection Effects With Heterogeneous Firms

J. Peter Neary and Mrázová, Monika
Authors registered in the RePEc Author Service: Monika Mrazova ()

No 9288, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: We characterize how firms select between alternative ways of serving a market. ``First-order" selection effects, whether firms enter or not, are extremely robust. "Second-order" ones, how firms serve a market conditional on entry, are less so: more efficient firms will select into the entry mode with lower market-access costs, if and only if firms' maximum profits are supermodular in production and market access costs. Supermodularity holds in many cases but not in all. Exceptions include FDI (both horizontal and vertical) when demands are "sub-convex" (i.e., less convex than CES), fixed costs that vary with access mode, and R&D with threshold effects.

Keywords: Foreign direct investment (fdi); Heterogeneous firms; Proximity-concentration trade-off; R&d with threshold effects; Super- and sub-convexity; Supermodularity (search for similar items in EconPapers)
JEL-codes: F12 F15 F23 (search for similar items in EconPapers)
Date: 2013-01
New Economics Papers: this item is included in nep-com and nep-int
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (23)

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Related works:
Journal Article: Selection Effects with Heterogeneous Firms (2019)
Working Paper: Selection Effects with Heterogeneous Firms (2012)
Working Paper: Selection effects with heterogeneous firms (2012)
Working Paper: Selection Effects with Heterogeneous Firms (2011)
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