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We build a theoretical model of multi-product firms that highlights how competition across market destinations affects both a firm f s exported product range and product mix. We show how tougher competition in an export market induces a firm to skew its export sales toward its best performing products. We find very strong confirmation of this competitive effect for French exporters across export market destinations. Theoretically, this within-firm change in product mix driven by the trading environment has important repercussions on firm productivity. A calibrated fit to our theoretical model reveals that these productivity effects are potentially quite large.

This article quantifies the relationship between market size and innovation in the pharmaceutical industry using improved, and newer, methods and data. We find significant elasticities of innovation to expected market size with a point estimate under our preferred specification of 0.23. This suggests that, on average, $2.5 billion is required in additional revenue to support the invention of one new chemical entity. This magnitude is plausible given recent accounting estimates of the cost of innovation of $800 million to$1 billion per drug, and marginal costs of manufacture and distribution near 50%.

In order to examine the impacts of market size on entrepreneurship, we estimate a monopolistic competition model that involves the workers’ decisions to pursue entrepreneurship by using data on Japanese prefectures. Our results show that a larger market size in terms of population density leads to a higher incentive for individuals to become entrepreneurs. A 10% increase in the population density increases the share of people who wish to become entrepreneurs by ∼1%. In contrast, such a positive effect on the self-employment rate is observed only for prefectures with very high or very low density. The self-employment ratio is negatively associated with population density in prefectures with medium density. This suggests that the there are manyex anteentrepreneurs but fewex postentrepreneurs.

I analyze the effects of competition on process innovation and product introduction and obtain robust results that hold for a range of market structures and competition modes. It is found that increasing the number of firms tends to decrease cost reduction expenditure per firm, whereas increasing the degree of product substitutability, with or without free entry, increases it-provided that the average demand for product varieties does not shrink. Increasing market size increases cost reduction expenditure per firm and has ambiguous effects on the number of varieties offered, while decreasing the cost of entry increases the number of entrants and varieties but reduces cost reduction expenditure per variety. The results are extended to other measures of competitive pressure and to investment in product quality. The framework and results shed light on empirical strategies to assess the impact of competition on innovation.

In the past few decades multistore retailers, especially those with 100 or more stores, have experienced substantial growth. At the same time, there is widely reported public outcry over the impact of these chain stores on other retailers and local communities. This paper develops an empirical model to assess the impact of chain stores on other discount retailers and to quantify the size of the scale economies within a chain. The model has two key features. First, it allows for flexible competition patterns among all players. Second, for chains, it incorporates the scale economies that arise from operating multiple stores in nearby regions. In doing so, the model relaxes the commonly used assumption that entry in different markets is independent. The lattice theory is exploited to solve this complicated entry game among chains and other discount retailers in a large number of markets. It is found that the negative impact of Kmart's presence on Wal-Mart's profit was much stronger in 1988 than in 1997, while the opposite is true for the effect of Wal-Mart's presence on Kmart's profit. Having a chain store in a market makes roughly 50% of the discount stores unprofitable. Wal-Mart's expansion from the late 1980s to the late 1990s explains about 40-50% of the net change in the number of small discount stores and 30-40% for all other discount stores. Scale economies were important for Wal-Mart, but less so for Kmart, and the magnitude did not grow proportionately with the chains' sizes.

We study market liberalisation under imperfect competition in the presence of price effects. For this purpose, we build a three-country model of international trade under monopolistic competition. The neighbouring effect translates how the size effect propagates across countries. When a country increases in size, its relative wage increases, as well as that in a small and nearby country, whereas that in a large and distant country falls. We also show that a preferential trade agreement increases the relative wage, the welfare and the terms of trade in the partner countries, where the integration effect dominates, while lowering those in the third country.

This paper investigates the effect of (potential) market size on entry of new drugs and pharmaceutical innovation. Focusing on exogenous changes driven by U. S. demographic trends, we find a large effect of potential market size on the entry of nongeneric drugs and new molecular entities. These effects are generally robust to controlling for a variety of supply-side factors and changes in the technology of pharmaceutical research.

The price-aggressive discount format, popularized by chains such as Aldi and Lidl, is very successful in most Western economies. Its success is a major source of concern for traditional supermarkets. Discounters not only have a direct effect on supermarkets' market shares, but they also exert considerable pressure to improve operational efficiency and/or to decrease prices. We use an empirical entry model to study the degree of intra- and interformat competition between discounters and supermarkets. Information on the competitive impact of new entrants is derived from the observed entry decisions of supermarkets and discounters in a large cross section of local markets, after controlling for a number of local market characteristics. In our modeling framework, we endogenize the number of retailers and allow for asymmetric intra- and interformat competitive effects in a flexible way. We apply our modeling approach to the German grocery industry, where the discount format has stabilized after two decades of continued growth. We find evidence of intense competition within both the supermarket and discounter format, although competition between supermarkets is found to be more severe. Most importantly, discounters only start to affect the profitability of conventional supermarkets from the third entrant onwards. This may explain why many retailers rush to add a discount chain to their portfolio: early entrants may benefit from the growth of the discount-prone segment without cannibalizing the profits of their more conventional supermarket stores.

Consumers frequently consume hedonic products together with other consumers and derive value from this shared experience. This article investigates the impact of shared consumption, a type of social influence that determines the enjoyment of joint experiences, in the context of a typical hedonic product: movies. The authors argue that this type of influence has important consequences for the diffusion curves of hedonic goods that are consumed together and the effectiveness of advertising in generating launch and postlaunch sales. An empirically validated agentbased model simulates the U.S. motion picture market, with new movies launching, competing, and exiting. The agent-based model serves as a means to demonstrate the essential role of shared consumption for explaining movie life cycles and tests how advertising expenditures accelerate and/or acquire movies' demand in markets with varying levels of shared consumption. The results provide key theoretical insights for the new product diffusion of hedonic products and help managers predict the financial consequences of their strategic decisions.

Do larger markets offer better products? The question has implications for theories of cities and theories of market organization. We document that in the restaurant industry, where quality is produced largely with variable costs, the range of qualities on offer increases in market size. In daily newspapers, where quality is produced with fixed costs, the average quality of products increases with market size, but the market does not offer much additional variety as it grows large. These results are consistent with IO theories of endogenous product quality and with theories that emphasize the consumption advantages of cities.