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Localization of industry and vertical disintegration

We argue that the rationalization gains often predicted by static applied general equilibrium models with imperfect competition and scale economies are artificially boosted by an unrealistic treatment of fixed costs. We introduce sunk costs into one such model calibrated with real-world data. We show how this changes the oligopoly game in a way significant enough to affect, both qualitatively and quantitatively, the outcome of a trade liberalization exercise.
Year of publication:
1995
Authors: Holmes, Thomas J.
Institutions: Federal Reserve Bank of Minneapolis
Subject: Industrial location
Extent:
application/pdf
Series:
Type of publication: Book / Working Paper
Language: English
Notes:
Number 190
Source:
Persistent link: https://www.econbiz.de/10005498553
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