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Trade and Imperfect Competition in General Equilibrium

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  • Onur A. Koska
  • Frank Stähler

Abstract

This paper employs a general equilibrium model of imperfect competition and trade in which capital is used to establish firms and labor is used for production. We show that two different types of equilibria may exist, one with factor price equalization and one with different factor prices. When factor prices are equalized, trade improves welfare under relatively mild conditions. However, if factor prices differ, these conditions are not sufficient for mutual gains from trade.

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File URL: http://www.cesifo-group.de/portal/page/portal/DocBase_Content/WP/WP-CESifo_Working_Papers/wp-cesifo-2011/wp-cesifo-2011-08/cesifo1_wp3543.pdf
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Bibliographic Info

Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 3543.

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Date of creation: 2011
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Handle: RePEc:ces:ceswps:_3543

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Related research

Keywords: imperfect competition; international trade; general equilibrium;

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References

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  1. Brander, James & Krugman, Paul, 1983. "A 'reciprocal dumping' model of international trade," Journal of International Economics, Elsevier, vol. 15(3-4), pages 313-321, November.
  2. Terrence Bensel & Bruce Elmslie, 1992. "Rethinking international trade theory: a methodological appraisal," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 128(2), pages 249-265, June.
  3. Egbert Dierker & Hildegard Dierker & Birgit Grodal, 2003. "Cournot-Nash Competition in a General Equilibrium Model of International Trade," Discussion Papers 03-28, University of Copenhagen. Department of Economics.
  4. Ngo Van Long & Horst Raff & Frank Stähler, 2009. "Innovation and Trade with Heterogeneous Firms," CESifo Working Paper Series 2796, CESifo Group Munich.
  5. Bulow, Jeremy I & Geanakoplos, John D & Klemperer, Paul D, 1985. "Multimarket Oligopoly: Strategic Substitutes and Complements," Journal of Political Economy, University of Chicago Press, vol. 93(3), pages 488-511, June.
  6. Brecher, Richard A. & Choudhri, Ehsan U., 1982. "The factor content of international trade without factor-price equalization," Journal of International Economics, Elsevier, vol. 12(3-4), pages 277-283, May.
  7. Marc J. Melitz & Gianmarco I. P. Ottaviano, 2008. "Market Size, Trade, and Productivity," Review of Economic Studies, Oxford University Press, vol. 75(1), pages 295-316.
  8. Thorsten Upmann & Frank Stähler, 2003. "Market Entry Regulation and International Competition," CESifo Working Paper Series 979, CESifo Group Munich.
  9. James Brander, 1980. "Intra-Industry Trade in Identical Commodities," Working Papers 380, Queen's University, Department of Economics.
  10. R. Dornbusch & S. Fischer & P. A. Samuelson, 1976. "Comparative Advantage, Trade and Payments in a Ricardian Model With a Continuum of Goods," Working papers 178, Massachusetts Institute of Technology (MIT), Department of Economics.
  11. JASKOLD GABSZEWICZ, Jean & VIAL, Jean-Philippe, . "Oligopoly "à la Cournot" in a general equilibrium analysis," CORE Discussion Papers RP -106, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  12. Neary, J. Peter, 2004. "Cross-Border Mergers as Instruments of Comparative Advantage," Center for European, Governance and Economic Development Research Discussion Papers 34, University of Goettingen, Department of Economics.
  13. J. Peter Neary, 2010. "Two and a Half Theories of Trade †," The World Economy, Wiley Blackwell, vol. 33(1), pages 1-19, 01.
  14. Melitz, Marc J, 2002. "The Impact of Trade on Intra-Industry Reallocations and Aggregate Industry Productivity," CEPR Discussion Papers 3381, C.E.P.R. Discussion Papers.
  15. John Romalis, 2004. "Factor Proportions and the Structure of Commodity Trade," American Economic Review, American Economic Association, vol. 94(1), pages 67-97, March.
  16. David M. Kreps & Jose A. Scheinkman, 1983. "Quantity Precommitment and Bertrand Competition Yield Cournot Outcomes," Bell Journal of Economics, The RAND Corporation, vol. 14(2), pages 326-337, Autumn.
  17. Dornbusch, Rudiger & Fischer, Stanley & Samuelson, Paul A, 1980. "Heckscher- Ohlin Trade Theory with a Continuum of Goods," The Quarterly Journal of Economics, MIT Press, vol. 95(2), pages 203-24, September.
  18. Egbert Dierker & Hildegard Dierker, 2006. "General Equilibrium with Imperfect Competition," Journal of the European Economic Association, MIT Press, vol. 4(2-3), pages 436-445, 04-05.
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Cited by:
  1. Colacicco, Rudy, 2012. "Strategic Trade Policy in General Oligopolistic Equilibrium," MPRA Paper 38118, University Library of Munich, Germany.

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