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Trade and imperfect competition in general equilibrium

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  • Koska, Onur A.
  • Stähler, Frank

Abstract

This paper employs a multi-industry general equilibrium model of oligopolistic competition, free market entry and trade in which capital is used to establish firms and labor is used for production. We show that both absolute and relative endowments matter for the pattern of trade. We demonstrate that market entry to each industry is either too excessive or too moderate while the effect on firm size is ambiguous. If countries are sufficiently symmetric, trade will increase the wage–rental ratio in both countries. Furthermore, trade will increase per-capita consumption in capital-intensive industries and reduce it in labor-intensive industries. Nevertheless, trade will be mutually welfare-improving under relatively mild conditions.

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  • Koska, Onur A. & Stähler, Frank, 2014. "Trade and imperfect competition in general equilibrium," Journal of International Economics, Elsevier, vol. 94(1), pages 157-168.
    • Handle: RePEc:eee:inecon:v:94:y:2014:i:1:p:157-168
    DOI: 10.1016/j.jinteco.2014.05.004
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    3. Koska, Onur A. & Stähler, Frank, 2015. "Factor price differences in a general equilibrium model of trade and imperfect competition," Research in Economics, Elsevier, vol. 69(2), pages 248-259.
    4. Ioana Veronica ALEXA & Simona Valeria TOMA & Daniela Ancuţa SARPE, 2013. "Strategic Investment and Trade in an Oligopolistic Setting," Economics and Applied Informatics, "Dunarea de Jos" University of Galati, Faculty of Economics and Business Administration, issue 2, pages 5-10.
    5. Colacicco, Rudy, 2012. "Strategic Trade Policy in General Oligopolistic Equilibrium," MPRA Paper 38118, University Library of Munich, Germany.

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    More about this item

    Keywords

    Oligopolistic competition; International trade; General equilibrium;
    All these keywords.

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • D50 - Microeconomics - - General Equilibrium and Disequilibrium - - - General

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