Assoc. Prof. Luca Macedoni

Carry Along Trade

Entering a new market presents a challenging scenario for firms, characterized by uncertain profits and certain upfront costs. In dealing with the trade-off between uncertain market demand and certain costs of entry, firms aim to minimize the costs associated with this uncertainty. Currently, Luca Macedoni with his coauthors is working on a paper that demonstrates that one common strategy employed by firms is to initially enter a market by distributing goods produced by other companies, a practice known as Carry Along Trade (CAT).

Using firm-level data on production and trade from Denmark, Mr. Macedon and his collaborators document that firms frequently employ a strategy of selling products manufactured by others when entering new markets. To rationalize this stylized fact, a model is proposed to account for the uncertainties faced by firms during market entry. The key intuition of the model is that firms may enter with CAT in order to learn about market conditions that are necessary to make the optimal investment decisions for the firms’ own produced goods. The implications of the model are then tested using Danish firm-level data.

Luca Macedoni's research focuses on international trade and industrial organization. He has specific interests in the effects of regulations in international markets and the role played by superstar firms and multi-product firms.

Luca Macedoni is an Associate Professor at the Department of Economics and Business Economics, Aarhus University, and a research fellow at the Research Centre for Firms and Industry Dynamics (FIND). He holds a PhD in Economics from the University of California, Davis (2017).