Firms` Strategic Decisions: Theoretical and Empirical Findings

Volume: 3

Oligopoly and Price Discrimination: Firm Size and Export in an Open Economy

Author(s): Alokesh Barua, Bishwanath Goldar and Muskaan Narang

Pp: 237-253 (17)

DOI: 10.2174/9781681086255118030015

* (Excluding Mailing and Handling)


This chapter is an attempt to empirically examine the relationship between firm’s size and export-intensities of manufacturing firms in India in a discriminating oligopoly model. The model predicts that in such a model, where the firm behaves like a price taker in the world market and the domestic market is protected by prohibitive tariffs, lower cost firms tend to produce more outputs and therefore export proportionately more outputs. Using the unit level factory level data for the Indian economy for the year of 2009 from the Annual Survey of Industries, we test the propositions (1) firm level output and the marginal cost of the firm and (2) export share of the firm and the firm size being measured in terms of the fixed capital assets held by the firm. We further examine if transport advantage in terms of costal location of the firms has any impact on the firm export.

Keywords: Domestic market, Export, Firm size, International market, Oligopoly, Open economy, Price discrimination.

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