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Heterogeneous firms and cost sharing in China's marketplaces

Author

Listed:
  • Ding, Ke
  • Gokan, Toshitaka
  • Zhu, Xiwei

Abstract

This study extends Melitz's model with heterogeneous firms by introducing shared fixed costs in a marketplace. It aims to explain heterogeneous firms' choice between traditional marketplaces and modern distribution channels on the basis of their productivities. The results reveal that the co-existence of a traditional marketplace and modern distribution channels improves social welfare. In addition, a deregulation policy for firm entry outside a marketplace and accumulation of human capital are factors that contribute to improve the social welfare.

Suggested Citation

  • Ding, Ke & Gokan, Toshitaka & Zhu, Xiwei, 2016. "Heterogeneous firms and cost sharing in China's marketplaces," IDE Discussion Papers 582, Institute of Developing Economies, Japan External Trade Organization(JETRO).
    • Handle: RePEc:jet:dpaper:dpaper582
    as

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    References listed on IDEAS

    as
    1. Marc J. Melitz, 2003. "The Impact of Trade on Intra-Industry Reallocations and Aggregate Industry Productivity," Econometrica, Econometric Society, vol. 71(6), pages 1695-1725, November.
    2. Ding Ke, 2012. "Market Platforms, Industrial Clusters and Small Business Dynamics," Books, Edward Elgar Publishing, number 14950.
    3. Dixit, Avinash K & Stiglitz, Joseph E, 1977. "Monopolistic Competition and Optimum Product Diversity," American Economic Review, American Economic Association, vol. 67(3), pages 297-308, June.
    4. Douglass C. North, 1991. "Institutions," Journal of Economic Perspectives, American Economic Association, vol. 5(1), pages 97-112, Winter.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    China; Business enterprises; Costs; Econometric model; Market; Heterogeneous firms; Marketplace; Cost sharing; Multiplicity;
    All these keywords.

    JEL classification:

    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)
    • D04 - Microeconomics - - General - - - Microeconomic Policy: Formulation; Implementation; Evaluation

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