Selection effects with heterogeneous firms

Monika Mrazova () and J. Peter Neary

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

Abstract: We provide a general characterization of which firms will select alternative ways of serving a market. If and only if firms' maximum profits are supermodular in production and marketaccess costs, more efficient firms will select into the activity with lower market-access costs. Our result applies in a range of models and under a variety of assumptions about market structure. We show that 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.

JEL-codes: F12 F15 F23 (search for similar items in EconPapers)
Pages: 53 pages
Date: 2012
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

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http://eprints.lse.ac.uk/51521/ Open access version. (application/pdf)

Related works:
Journal Article: Selection Effects with Heterogeneous Firms (2019)
Working Paper: Selection Effects With Heterogeneous Firms (2013)
Working Paper: Selection Effects with Heterogeneous Firms (2012)
Working Paper: Selection Effects with Heterogeneous Firms (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:ehl:lserod:51521

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