Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/104437
Authors: 
Irlacher, Michael
Year of Publication: 
2014
Series/Report no.: 
Munich Discussion Paper 2014-31
Abstract: 
In this paper, I investigate welfare gains associated with trade induced intra-firm adjustments of multi-product firms. To disentangle the welfare gains, I split up the R&D portfolio of a multi-product firm into three different channels: i) product innovation, ii) investments in the degree of product differentiation, and iii) process innovation. Trade integration enables firms to exploit economies of scale as innovation requires upfront development costs and encourages firms to spend more on R&D. I derive the indirect utility function and show that consumers bene.t from this behavior through a larger product range (love of variety) which is also more differentiated (love of diversity). Furthermore, a larger market is associated with technology upgrading. The resulting cost savings are passed on to consumers, leading to welfare gains from lower prices.
Subjects: 
International Trade
Multi-Product Firms
Gains from Trade
R&D
Cannibalization Effect
Product Differentiation
JEL: 
F12
F61
L25
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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