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Discussion Paper Details

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Title: Not So Demanding: Demand Structure and Firm Behavior

Author(s): Monika Mr�zov� and J Peter Neary

Publication Date: February 2016

Keyword(s): Heterogeneous Firms, Pass-Through, Quantifying Responses to Trade Liberalization, Super- and Sub-Convexity and Supermodularity

Programme Area(s): International Trade and Regional Economics

Abstract: We show that any well-behaved demand function can be represented by its demand manifold, a smooth curve which relates the elasticity and convexity of demand. This manifold is a sufficient statistic for many comparative statics questions; leads naturally to characterizations of new families of demand functions which nest most of those used in applied economics; and connects assumptions about demand structure with firm behavior and economic performance. In particular, we show that the demand manifold leads to new insights about industry adjustment with heterogeneous firms, and provides a quantitative framework for measuring the effects of globalization.

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Bibliographic Reference

Mr�zov�, M and Neary, J. 2016. 'Not So Demanding: Demand Structure and Firm Behavior'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=11119