Reports
Discussion Papers
No.582 Heterogeneous Firms and Cost Sharing in China's Marketplaces
by Ke Ding , Toshitaka Gokan and Xiwei Zhu
March 2016
ABSTRACT
This study extends Melitz's model with heterogeneous firms by introducing shared fixed costs in a marketplace. It aims to explain heterogeneous firms' choice between traditional marketplaces and modern distribution channels on the basis of their productivities. The results reveal that the co-existence of a traditional marketplace and modern distribution channels improves social welfare. In addition, a deregulation policy for firm entry outside a marketplace and accumulation of human capital are factors that contribute to improve the social welfare.
Keywords: Heterogeneous firms; Marketplace; Cost sharing; Multiplicity
JEL classification: D04, R12
Please note that discussion papers are works in various stages of progress and most have not been edited and proofread and may contain errors of fact or judgment. Revised versions of these papers may subsequently appear in more formal publication series. The views expressed in this publication are those of the author(s). The IDE does not guarantee the accuracy of the data included and accepts no responsibility for any consequences arising from its use.