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On the Persistence of Leadership or Leapfrogging in International Trade

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Author Info
Cabrales, Antonio
Motta, Massimo
Thisse, Jacques-François

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Abstract

When two countries, starting from different quality levels reflecting different conditions of domestic market demand, open to trade, two possible equilibria arise. In the first, the quality leader maintains its position. In the second, leapfrogging occurs. The latter is possible only if the initial quality gap is not too wide, however. Further, when the risk dominance criterion is used, only the former equilibrium is selected. This result holds for both segmented and integrated markets. Qualities, profits and world welfare are higher when firms can price discriminate (i.e. under segmented markets).

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 1106.

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Date of creation: Jan 1995
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Handle: RePEc:cpr:ceprdp:1106

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Related research
Keywords: Country Asymmetries Integrated Markets; Equilibrium Selection; International Trade; Product Differentiation; Segmented Markets;

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Find related papers by JEL classification:
F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies
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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  1. José Luis Moraga-González & Jean-Marie Viaene, 2004. "Dumping in Developing and Transition Economies," Tinbergen Institute Discussion Papers 04-125/2, Tinbergen Institute. [Downloadable!]
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  2. Mina Baliamoune & Stefan Lutz, 2009. "Preemption, Predation, and Minimum Quality Standards," ICER Working Papers 20-2009, ICER - International Centre for Economic Research. [Downloadable!]
  3. José Luis Moraga-González & Jean-Marie Viaene, 2004. "Anti-Dumping, Intra-Industry Trade and Quality Reversals," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
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  4. Antonio Cabrales & Walter Garcia Fontes & Massimo Motta, 1997. "Risk Dominance Selects the Leader. An Experimental Analysis," Economics Working Papers 222, Department of Economics and Business, Universitat Pompeu Fabra. [Downloadable!]
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  5. Theo S Eicher & Klaas vant Veld, 2000. "Search in Research: An Evolutionary Approach to Technical Change and Growth"," Discussion Papers in Economics at the University of Washington 0005, Department of Economics at the University of Washington. [Downloadable!]
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  6. Werner Smolny, 2003. "Determinants of innovation behaviour and investment estimates for west-german manufacturing firms," Economics of Innovation and New Technology, Taylor and Francis Journals, vol. 12(5), pages 449-463, October. [Downloadable!] (restricted)
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  9. L. Lambertini & G. Rossini, 1996. "Vertical Differentiaiton, Trade and Endogenous Common Standards," Working Papers 263, Dipartimento Scienze Economiche, Universita' di Bologna. [Downloadable!]
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  10. José Luis Moraga & Jean-Marie Viaene, 1999. "Endogenous Quality Effects of Trade Policy," Tinbergen Institute Discussion Papers 99-094/2, Tinbergen Institute. [Downloadable!]
  11. Dan Ben-David & Michael B. Loewy, 1997. "Free Trade, Growth, and Convergence," NBER Working Papers 6095, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  12. E. Bacchiega & L. Lambertini & A. Mantovani, 2007. "Process and product innovation in a vertically differentiated industry," Working Papers 583, Dipartimento Scienze Economiche, Universita' di Bologna. [Downloadable!]
  13. S Lutz, 2005. "Regulatory Standards Can Lead to Predation," The School of Economics Discussion Paper Series 0509, Economics, The University of Manchester. [Downloadable!]
  14. Jose-Luis Moraga & Jean-Marie Viaene, 2001. "Procompetitive Trade Policies," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
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  15. Larry Karp & In Ho Lee, 1998. "Learning by Doing and the Choice of Technology," Levine's Working Paper Archive 2065, David K. Levine. [Downloadable!]
  16. Lutz, Stefan, 2003. "Mutual Recognition of National Minimum Quality Standards may Support International Convergence," ZEW Discussion Papers 03-17, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research. [Downloadable!]
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  17. Larry Karp & In Ho Lee, 2000. "Learning-by-Doing and the Choice of Technology: the Role of Patience," Department of Agricultural & Resource Economics, UC Berkeley, Working Paper Series 857, Department of Agricultural & Resource Economics, UC Berkeley. [Downloadable!]
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  18. FRÉDÉRIC CARLUER, 2005. "Dynamics of Russian regional clubs: The time of divergence," Regional Studies, Taylor and Francis Journals, vol. 39(6), pages 713-726, August. [Downloadable!] (restricted)
  19. Stylianos Perrakis & Christos Constantatos & Jean Lefoll, 2008. "Financial Structure and Product Qualities," Discussion Paper Series 2008_15, Department of Economics, University of Macedonia, revised Dec 2008. [Downloadable!]
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