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Multiplant Strategy under core-periphery structure

Discussion Papers

No.346

March 2012

ABSTRACT

A typical implicit assumption on monopolistic competition models for trade and economic geography is that firms can produce and sell only at one place. This paper fallows endogenous determination of the number of plants in a new economic geography model and examine the stable outcomes of organization choice between single-plant and multi-plant in two regions. We explicitly consider the firms' trade-off between larger economies of scale under single plant configuration and the saving in interregional transport costs under multi-plant configuration. We show that organization change arises under decreasing transportation costs and observe several organization configurations under a generalized cost function.


Keywords: Multi-plant firms, Transaction costs, New economic geography
JEL classification: D21, F12, L23, R12,

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