Technical Report Heterogeneous firms and cost sharing in China's marketplaces

Ding, Ke  ,  Gokan, Toshitaka  ,  Zhu, Xiwei

5822016-03-01 , Institute of Developing Economies (IDE-JETRO) 
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.

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