BIGGER IS BETTER: MARKET SIZE, DEMAND ELASTICITY, AND INNOVATION*
提出一种新机制：更大的市场规模通过增加产品种类加剧竞争，提高需求价格弹性并降低加成率，使企业规模扩大，从而更易分摊研发成本，促进过程创新。
This article proposes a novel mechanism whereby larger markets increase competition and facilitate process innovation. Larger markets, in the sense of more people or more open trade, support a larger variety of goods, resulting in a more crowded product space. This raises the price elasticity of demand and lowers markups. Firms, therefore, become larger to break even. This facilitates process innovation, as larger firms can amortize R&D costs over more goods. We demonstrate this mechanism in a standard model of process and product innovation. In doing so, we question some important results in the new trade and endogenous growth literatures.