Productivity and the Product Scope of Multi-Product Firms: A Test of Feenstra-Ma

Research output: Working paperWorking papers

Standard

Productivity and the Product Scope of Multi-Product Firms: A Test of Feenstra-Ma. / Raff, Horst; Wagner, Joachim.
Lüneburg: University of Lüneburg, 2012. (Working Paper Series in Economics; No. 257).

Research output: Working paperWorking papers

Harvard

Raff, H & Wagner, J 2012 'Productivity and the Product Scope of Multi-Product Firms: A Test of Feenstra-Ma' Working Paper Series in Economics, no. 257, University of Lüneburg, Lüneburg.

APA

Raff, H., & Wagner, J. (2012). Productivity and the Product Scope of Multi-Product Firms: A Test of Feenstra-Ma. (Working Paper Series in Economics; No. 257). University of Lüneburg.

Vancouver

Raff H, Wagner J. Productivity and the Product Scope of Multi-Product Firms: A Test of Feenstra-Ma. Lüneburg: University of Lüneburg. 2012. (Working Paper Series in Economics; 257).

Bibtex

@techreport{0ed2d667968c44188de82dc0997b982d,
title = "Productivity and the Product Scope of Multi-Product Firms: A Test of Feenstra-Ma",
abstract = "Feenstra and Ma (2008) develop a monopolistic competition model where firms choose their optimal product scope by balancing the profits from a new variety against the costs of “cannibalizing” sales of existing varieties. While more productive firms always have a higher market share, there is no monotonic relationship between firms{\textquoteright} productivity level and their choices of product scope. In the model having a higher market share means that firms are hurt more by the “cannibalization effect”. Therefore, the incentive to add more products weakens as productivity rises. This leads to Lemma 3 in Feenstra and Ma (2008): There is an inverted U-shaped relationship between firms{\textquoteright} productivities and the range of varieties they choose to produce. This empirical note takes this Lemma to the data for firms from German manufacturing industries. Empirical evidence is in line with the results from the theoretical model.",
keywords = "Economics, Multi-product firms, productivity, optimal product scope, germany",
author = "Horst Raff and Joachim Wagner",
year = "2012",
language = "English",
series = "Working Paper Series in Economics",
publisher = "University of L{\"u}neburg",
number = "257",
address = "Germany",
type = "WorkingPaper",
institution = "University of L{\"u}neburg",

}

RIS

TY - UNPB

T1 - Productivity and the Product Scope of Multi-Product Firms: A Test of Feenstra-Ma

AU - Raff, Horst

AU - Wagner, Joachim

PY - 2012

Y1 - 2012

N2 - Feenstra and Ma (2008) develop a monopolistic competition model where firms choose their optimal product scope by balancing the profits from a new variety against the costs of “cannibalizing” sales of existing varieties. While more productive firms always have a higher market share, there is no monotonic relationship between firms’ productivity level and their choices of product scope. In the model having a higher market share means that firms are hurt more by the “cannibalization effect”. Therefore, the incentive to add more products weakens as productivity rises. This leads to Lemma 3 in Feenstra and Ma (2008): There is an inverted U-shaped relationship between firms’ productivities and the range of varieties they choose to produce. This empirical note takes this Lemma to the data for firms from German manufacturing industries. Empirical evidence is in line with the results from the theoretical model.

AB - Feenstra and Ma (2008) develop a monopolistic competition model where firms choose their optimal product scope by balancing the profits from a new variety against the costs of “cannibalizing” sales of existing varieties. While more productive firms always have a higher market share, there is no monotonic relationship between firms’ productivity level and their choices of product scope. In the model having a higher market share means that firms are hurt more by the “cannibalization effect”. Therefore, the incentive to add more products weakens as productivity rises. This leads to Lemma 3 in Feenstra and Ma (2008): There is an inverted U-shaped relationship between firms’ productivities and the range of varieties they choose to produce. This empirical note takes this Lemma to the data for firms from German manufacturing industries. Empirical evidence is in line with the results from the theoretical model.

KW - Economics

KW - Multi-product firms

KW - productivity

KW - optimal product scope

KW - germany

M3 - Working papers

T3 - Working Paper Series in Economics

BT - Productivity and the Product Scope of Multi-Product Firms: A Test of Feenstra-Ma

PB - University of Lüneburg

CY - Lüneburg

ER -

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