DP5941 Multi-Product Firms and Flexible Manufacturing in the Global Economy

Author(s): Carsten Eckel, J Peter Neary
Publication Date: November 2006
Keyword(s): flexible manufacturing, general oligoplistic equilibrium (GOLE), international trade, multi-product firms, product diversity
JEL(s): F12, L13
Programme Areas: International Trade and Regional Economics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=5941

We present a new model of multi-product firms (MPFs) and flexible manufacturing and explore its implications in partial and general equilibrium. International trade integration affects the scale and scope of MPFs through a competition effect and a demand effect. We demonstrate how MPFs adjust in the presence of single-product firms and in heterogeneous industries. Our results are in line with recent empirical evidence and suggest that MPFs in conjunction with flexible manufacturing play an important role in the impact of international trade on product diversity.