Product Differentiation, the Volume of Trade and Profits under Cournot and Bertrand Duopoly
AbstractThis paper analyses how product differentiation affects the volume of trade under duopoly using Shubik-Levitan demand functions rather than the Bowley demand functions used by Bernhofen (2001). The Shubik-Levitan demand functions have the advantage that an increase in product differentiation does not increase the size of the market as happens with the Bowley demand functions. It is shown that the volume of trade in terms of quantities is decreasing in the degree of product differentiation when the trade cost is relatively low, but increasing in the degree of product differentiation when the trade cost is relatively high.
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Bibliographic InfoPaper provided by Cardiff University, Cardiff Business School, Economics Section in its series Cardiff Economics Working Papers with number E2011/26.
Length: 24 pages
Date of creation: Nov 2011
Date of revision:
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More information through EDIRC
Product Differentiation; Cournot Oligopoly; Bertrand Oligopoly;
Find related papers by JEL classification:
- F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
- F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-11-21 (All new papers)
- NEP-BEC-2011-11-21 (Business Economics)
- NEP-COM-2011-11-21 (Industrial Competition)
- NEP-INT-2011-11-21 (International Trade)
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