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Michael Irlacher
''Multi-product firms and gains from trade through intra-firm adjustments''
( 2018, Vol. 38 No.4 )
This paper investigates welfare gains associated with trade induced adjustments within multi-product firms. To disentangle the welfare gains, I focus on two distinct channels: investments in i) product variety and ii) the degree of product differentiation. Trade integration enables firms to exploit economies of scale in innovation and induces more investments in product scope. To reduce cannibalization among varieties, multi-product firms have incentives to invest in the degree of differentiation. I show how variety loving consumers benefit from a wider and more diversified product range.
Keywords: Multi-product firms, Gains from trade, R&D, Cannibalization effect, Product differentiation
JEL: F1 - Trade: General
L2 - Firm Objectives, Organization, and Behavior: General
Manuscript Received : Oct 12 2017 Manuscript Accepted : Dec 02 2018

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