Competition for firms in an oligopolistic industry: The impact of economic integration
AbstractWe set up a model of generalised oligopoly where two countries of different size compete for an exogenous, but variable, number of identical firms. The model combines a desire by national governments to attract internationally mobile firms with the existence of location rents that arise even in a symmetric equilibrium where firms are dispersed. As economic integration proceeds, equilibrium taxes initially decline, but then rise again as trade costs fall even further. A range of trade costs is identified where economic integration raises the welfare of the small country, but lowers welfare in the large country.
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Bibliographic InfoArticle provided by Elsevier in its journal Journal of International Economics.
Volume (Year): 80 (2010)
Issue (Month): 2 (March)
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Web page: http://www.elsevier.com/locate/inca/505552
Tax/subsidy competition Oligopolistic markets Economic integration;
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