We study the impact of import protection on relationship-specific investments, organizational choice and welfare. We show that a tariff on intermediate inputs can improve social welfare through mitigating hold-up problems. It does so if it discriminates in favor of the investing party, thereby...

"This paper reviews the recent theoretical literature on heterogeneous firms and trade, which emphasizes firm selection into international markets and reallocations of resources across firms. We discuss the empirical challenges that motivated this research and its relationship to traditional...

In an incomplete contracts model where there are otherwise no social motives for protection, we show that protection is socially beneficial when a buyer outsources customized inputs from a specialized domestic supplier while also purchasing generic inputs from the world market. The reason is...

We analyze a model of cost-reducing R&D and compatibility decisions by two platforms. After an exogenous improvement in the efficiency of R&D, each platform has a heightened incentive to make its software incompatible with the rival's hardware device to avoid being dominated in the hardware...

This paper reviews the recent theoretical literature on heterogeneous firms and trade, which emphasizes firm selection into international markets and reallocations of resources across firms. We discuss the empirical challenges that motivated this research and its relationship to traditional...