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International trade with endogenous mode of competition in general equilibrium

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  • NEARY, J. Peter

    ()
    (Department of Economics, University of Oxford, U.K.)

  • THARAKAN, Joe

    ()
    (Department of Economics, Université de Liège and Université catholique de Louvain, CORE, B-1348 Louvain-la-Neuve, Belgium)

Abstract

This paper endogenizes the extent of intra-sectoral competition in a multi-sectoral general-equilibrium model of oligopoly and trade. Firms choose capacity followed by prices. If the benefits of capacity investment in a given sector are below a threshold level, the sector exhibits Bertrand behaviour, otherwise it exhibits Cournot behaviour. By endogenizing the threshold parameter in general equilibrium, we show how exogenous shocks such as globalization and technological change alter the mix of sectors between “more” and “less” competitive, or Bertrand and Cournot, and affect the relative wages of skilled and unskilled workers, even in a “North-North” model with identical countries.

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Bibliographic Info

Paper provided by Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) in its series CORE Discussion Papers with number 2011038.

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Date of creation: 01 Sep 2011
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Handle: RePEc:cor:louvco:2011038

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Keywords: Bertrand and Cournot competition; GOLE (General Oligopolistic Equilibrium); Kreps-Scheinkman; market integration; trade; technology and wages;

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Citations

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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.
  2. 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.
  3. Colacicco, Rudy, 2012. "The "Average" Within-Sector Firm Heterogeneity in General Oligopolistic Equilibrium," MPRA Paper 40212, University Library of Munich, Germany.
  4. Abdessalem Abbassi & Lota D. Tamini & Ahlem Dakhlaoui, 2013. "Production Cost Asymmetry, Minimum Access and Reciprocal Dumping," Cahiers de recherche CREATE 2013-7, CREATE.

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