Events

Dr. Chenying Yang
Assistant Professor
Singapore Management University 

I develop a quantitative model of multi-plant oligopolists where each firm decides where to locate the set of plants and how to serve each market, taking into account cannibalization and competition. In contrast to canonical trade models with multinational firms where neither spatial interdependency in production nor oligopoly is considered, the multi-plant firm here increases her markups by adding one more plants but the marginal benefit declines with more plants being built. Despite having a high-dimensional discrete choice problem, I provide an estimation toolkit for the model leveraging the solution algorithm for a combinatorial problem when the location game is submodular and aggregative. Applying the model to the cement industry in the US and Canada, I find that a carbon tax of $50 per ton of CO2 on cement induces 18% carbon leakage, and the taxing economy loses, especially when the industry is concentrated. Neglecting the interdependencies of plant locations within a multi-plant firm substantially biases the estimates and over-predicts the degree of carbon leakage.

This is a joint seminar organized by HKU, CUHK, City U, HKUST and Lingnan U.

Please contact Xiameng PAN at xmpan@connect.hku.hk for registration.