Multi-product firms at home and away: Cost- versus quality-based competence

Carsten Eckel, Leonardo Iacovone, Beata Javorcik and J. Peter Neary

Munich Reprints in Economics from University of Munich, Department of Economics

Abstract: We develop a new model of multi-product firms which invest to improve the perceived quality of both their individual products and their brand. Because of flexible manufacturing, products closer to firms' core competence have lower costs, so firms produce more of them, and also have higher incentives to invest in their quality. These two effects have opposite implications for the profile of prices. Mexican data provide robust confirmation of the model's key prediction: firms in differentiated-good sectors exhibit quality-based competence (prices fall with distance from core competence), but export sales of firms in non-differentiated-good sectors exhibit the opposite pattern.

Keywords: Flexible manufacturing; Investment in product and brand quality; Multi-product firms; Quality competition (search for similar items in EconPapers)
JEL-codes: F12 (search for similar items in EconPapers)
Date: 2015
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Citations: View citations in EconPapers (132)

Published in Journal of International Economics 2 95(2015): pp. 216-232

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Related works:
Journal Article: Multi-product firms at home and away: Cost- versus quality-based competence (2015)
Working Paper: Multi-Product Firms at Home and Away: Cost- versus Quality-based Competence (2011)
Working Paper: Multi-product firms at home and away: Cost- versus quality-based competence (2010)
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