Two major paradigms prevail in trade theory: perfect competition and monopolistic competition. In the former case, only prices are important whereas product characteristics are important in the latter case. In both instances, pure-strategy equilibria exist. This paper considers the hybrid situation where some customers care only about the price while others have a brand preference or care about product characteristics. It is shown that an equilibrium in pure strategies does not exist but that a mixed-strategy equilibrium does exist. This in turn implies endogenous uncertainty in the pattern, terms, and the gains from trade.
Download Info
To download:
If you experience problems downloading a file, check if you have the
proper application to
view it first. Information about this may be contained
in the File-Format links below. In case of further problems read
the IDEAS help
page. Note that these files are not on the IDEAS
site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Contact details of provider: Postal: Canadian Economics Association Prof. Steven Ambler, Secretary-Treasurer c/o Olivier Lebert, CEA/CJE/CPP Office C.P. 35006, 1221 Fleury Est Montréal, Québec, Canada H2C 3K4 Email: Web page: http://economics.ca/cje/ More information through EDIRC
For technical questions regarding this item, or to correct its listing, contact: (Prof. Werner Antweiler).
Related research
Keywords:
Cited by: (explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)