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Multi-product firms and increasing marginal costs

Pavlov, Oscar


Recent literature has addressed how product creation amplifies economic fluctuations via the love of variety. Yet, the empirical evidence on variety effects is sparse. The current paper demonstrates that decreasing returns in the variety-level production technology, which leads to increasing marginal costs, similarly amplify business cycles. Product scope expansions reduce marginal costs and firms have an incentive to produce multiple products even if the variety effects are entirely absent....[Show more]

CollectionsANU Research Publications
Date published: 2021
Type: Journal article
Source: Journal of Economic Dynamics and Control
DOI: 10.1016/j.jedc.2021.104239


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