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Firm Heterogeneity and International Trade Liberalisation: A Generalized Cournot Oligopoly Approach

Author

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  • Cieślik Andrzej

    (University of Warsaw, Faculty of Economic Sciences, Długa 44/50, 00-241 Warsaw, Poland)

Abstract

The main goal of this article is to contribute to the theoretical analysis of international trade under imperfect competition using the Cournot oligopoly model with heterogeneous firms. In particular, our objective is to provide some insights into the role of cost asymmetry in studying the effects of trade liberalisation in the Cournot oligopoly framework. In order to introduce firm heterogeneity into the oligopoly model we use the generalised Cournot framework with asymmetric firms that differ in terms of their productivity, levels of output and market shares. We show that trade liberalisation leads to the elimination of less productive firms and results in lower equilibrium prices, higher sales per firm and lower markups in the industry.

Suggested Citation

  • Cieślik Andrzej, 2024. "Firm Heterogeneity and International Trade Liberalisation: A Generalized Cournot Oligopoly Approach," Central European Economic Journal, Sciendo, vol. 11(58), pages 67-78, January.
    • Handle: RePEc:vrs:ceuecj:v:11:y:2024:i:58:p:67-78:n:7
    DOI: 10.2478/ceej-2024-0007
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    Keywords

    Cournot oligopoly model; firm heterogeneity; imperfect competition; international trade liberalisation; market structure; F12;
    All these keywords.

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation

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