Localization of industry and vertical disintegration

Thomas Holmes ()

No 190, Staff Report from Federal Reserve Bank of Minneapolis

Abstract: We argue that the rationalization gains often predicted by static applied general equilibrium models with imperfect competition and scale economies are artificially boosted by an unrealistic treatment of fixed costs. We introduce sunk costs into one such model calibrated with real-world data. We show how this changes the oligopoly game in a way significant enough to affect, both qualitatively and quantitatively, the outcome of a trade liberalization exercise.

Keywords: Industrial; location (search for similar items in EconPapers)
Date: 1995
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Citations: View citations in EconPapers (15)

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Journal Article: Localization Of Industry And Vertical Disintegration (1999)
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Persistent link: https://EconPapers.repec.org/RePEc:fip:fedmsr:190

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