Abstract

http://ssrn.com/abstract=1910910
 
 

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Borders, Geography, and Oligopoly: Evidence from the Wind Turbine Industry


A. Kerem Cosar


University of Chicago - Booth School of Business

Paul L.E. Grieco


Pennsylvania State University - Department of Economics

Felix Tintelnot


Penn State University

August 18, 2011


Abstract:     
Using a micro-level dataset of Danish and German wind turbine installations, we estimate a structural oligopoly model with cross-border trade and heterogeneous firms. Our approach allows us to separately identify border-related variable costs from distance-related variable costs, and to put bounds on fixed costs of exporting. We find that the variable border costs are large, equivalent to 400 kilometers (250 miles) in transport costs. Counterfactual analysis shows that the fixed costs are also important; removal of fixed border costs would increase German market share in Denmark from 2 to 12 percent. Our analysis illustrates how border frictions affect firm profits and consumer surplus on each side of the border. The results indicate that a complete elimination of border frictions would increase total welfare in the wind turbine industry by 5 percent in Denmark and 10 percent in Germany.

Number of Pages in PDF File: 32

Keywords: Borders, Home-Bias, Transport Costs, Oligopoly, Wind Energy, Trade

JEL Classification: C35, D43, F14, F15, L13, L64

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Date posted: August 17, 2011 ; Last revised: September 12, 2014

Suggested Citation

Cosar, A. Kerem and Grieco, Paul L.E. and Tintelnot, Felix, Borders, Geography, and Oligopoly: Evidence from the Wind Turbine Industry (August 18, 2011). Available at SSRN: http://ssrn.com/abstract=1910910 or http://dx.doi.org/10.2139/ssrn.1910910

Contact Information

A. Kerem Cosar
University of Chicago - Booth School of Business ( email )
1101 East 58th Street
Chicago, IL 60637
United States
HOME PAGE: http://faculty.chicagobooth.edu/kerem.cosar/
Paul L.E. Grieco (Contact Author)
Pennsylvania State University - Department of Economics ( email )
University Park
State College, PA 16802
United States
Felix Tintelnot
Penn State University ( email )
University Park
State College, PA 16802
United States
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