Multiproduct Transactions in International Markets.

This paper establishes that roughly 40 percent of all trade occurs within multiproduct transactions (MPTs). We document that MPTs are characterized by (i) a small number of products and small transaction sizes, (ii) the likelihood of MPTs decline in firm size, (iii) the likelihood of MPTs rises with transaction size, (iv) importers that source from relatively few suppliers. We propose a model of international sourcing rationalizing these features of the data. The model predicts that trade cost reductions leads to a reduction in MPTs, sourcing from a wider set of suppliers, and additional input cost reductions, reinforcing gains from trade.