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Product-market integration with endogenous firm heterogeneity

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  • Ivan Ledezma

Abstract

This paper proposes a general equilibrium oligopoly model in which firm heterogeneity is endogenously reproduced through technology adoption decisions. The model can explain persistent oligopolistic market structures and prices in spite of free entry and market enlargement. Moreover, strong selection might deteriorate average cost efficiency due to strategic interactions. Integrating identical countries can be welfare-improving. But distributional issues and tensions between welfare and scale economies may arise. The theory can be motivated by recent evidence on oligopolistic market structures resisting globalization forces.

Suggested Citation

  • Ivan Ledezma, 2021. "Product-market integration with endogenous firm heterogeneity," Oxford Economic Papers, Oxford University Press, vol. 73(3), pages 1345-1368.
    • Handle: RePEc:oup:oxecpp:v:73:y:2021:i:3:p:1345-1368.
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    File URL: http://hdl.handle.net/10.1093/oep/gpab001
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    JEL classification:

    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
    • F1 - International Economics - - Trade
    • D5 - Microeconomics - - General Equilibrium and Disequilibrium

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