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

A. Kerem Coşar, Paul L. E. Grieco () and Felix Tintelnot
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Paul L. E. Grieco: The Pennsylvania State University

Koç University-TUSIAD Economic Research Forum Working Papers from Koc University-TUSIAD Economic Research Forum

Abstract: Using a micro-level dataset of wind turbine installations in Denmark and Germany, we estimate a structural oligopoly model with cross-border trade and heterogeneous firms. Our approach separately identifies border-related from distance-related variable costs and bounds the fixed cost of exporting for each firm. Variable border costs are large: equivalent to roughly 400 kilometers (250 miles) in distance costs, which represents 40 to 50 percent of the average exporter's total delivery costs. Fixed costs are also important; removing them would increase German firms' market share in Denmark by 10 percentage points. Counterfactual analysis indicates that completely eliminating border frictions would increase total welfare in the wind turbine industry by 5 percent in Denmark and 10 percent in Germany.

Keywords: Trade costs; oligopoly; spatial competition; constrained MLE. (search for similar items in EconPapers)
JEL-codes: F14 L11 L20 L60 R12 (search for similar items in EconPapers)
Pages: 47 pages
Date: 2012-10
New Economics Papers: this item is included in nep-bec and nep-ure
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Citations: View citations in EconPapers (12)

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Related works:
Journal Article: Borders, Geography, and Oligopoly: Evidence from the Wind Turbine Industry (2015)
Working Paper: Borders, Geography and Oligopoly: Evidence from the Wind Turbine Industry (2014)
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