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Heterogeneous Firms and the Development of Marketplaces in Chinese Dual Economy (343KB) / Ke Ding, Toshitaka Gokan, and Xiwei Zhu
In this paper, we explain when traditional marketplaces and modern distribution channels coexist under the operation by heterogeneous firms. It is shown that the coexistence of firms in traditional marketplaces and firms with modern distribution channels improve welfare comparing with the case when no marketplace exists. Furthermore, it is shown that the lower transaction or fixed costs in marketplaces result in larger marketplaces and improve welfare.