Working Paper: CEPR ID: DP5941
Authors: Carsten Eckel; J. Peter Neary
Abstract: We present a new model of multi-product firms (MPFs) and flexible manufacturing and explore its implications in partial and general equilibrium. International trade integration affects the scale and scope of MPFs through a competition effect and a demand effect. We demonstrate how MPFs adjust in the presence of single-product firms and in heterogeneous industries. Our results are in line with recent empirical evidence and suggest that MPFs in conjunction with flexible manufacturing play an important role in the impact of international trade on product diversity.
Keywords: Flexible Manufacturing; General Oligopolistic Equilibrium; International Trade; Multiproduct Firms; Product Diversity
JEL Codes: F12; L13
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| output of one variety (C29) | demand for other varieties (R22) |
| output of one variety (C29) | output of other varieties (Y90) |
| flexible manufacturing (L23) | product lines expansion (L68) |
| product lines expansion (L68) | increasing marginal costs (D40) |
| international trade integration (F15) | competition (L13) |
| international trade integration (F15) | market size (L25) |
| competition (L13) | product range (L68) |
| market size (L25) | total output (E23) |
| demand effects (H31) | product diversity (L15) |