On the Persistence of Leadership or Leapfrogging in International Trade
AbstractWhen two countries starting from different quality levels (reflecting different conditions on domestic market demands) open to trade, two possible equilibria arise. In the first, the quality leader maintains its position. In the second, leapfrogging occurs. However, the latter is possible only if the initial quality gap is not too wide. Further, when the risk dominance criterion is used, only the former equilibrium is selected. These results suggest that initial conditions (such as domestic market size or home demand preferences) are important factors in determining relative competitiveness of firms in international markets. Copyright 1997 by Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association.
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Bibliographic InfoArticle provided by Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association in its journal International Economic Review.
Volume (Year): 38 (1997)
Issue (Month): 4 (November)
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Other versions of this item:
- Massimo MOTTA & Jean-François THISSE & Antonio CABRALES, 1996. "On the Persistence of Leadership or Leapfrogging in International Trade," Cahiers de Recherches Economiques du DÃ©partement d'EconomÃ©trie et d'Economie politique (DEEP) 9625, Université de Lausanne, Faculté des HEC, DEEP.
- Cabrales, Antonio & Motta, Massimo & Thisse, Jacques-François, 1995. "On the Persistence of Leadership or Leapfrogging in International Trade," CEPR Discussion Papers 1106, C.E.P.R. Discussion Papers.
- Motta, M. & Thisse, J.-F. & Cabrales, A., . "On the persistence of leadership or leapfrogging in international trade," CORE Discussion Papers RP -1287, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
- F15 - International Economics - - Trade - - - Economic Integration
- L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
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