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International Capacity Choice and National Market Games

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  • Venables, Anthony J.

Abstract

A series of models are developed in which international trade is modelled as a two-stage game between firms in two countries. At the first stage firms choose their productive capacity. At the second stage different types of market game are played. The most interesting case is that in which firms play a separate price game in each national market, given their worldwide capacity levels. It is established that (i) firms use capacity strategically, in order to manipulate the distribution of rivals' output between markets; (ii) the volume of intra-industry trade is intermediate between the two cases most extensively studied in the trade literature (integrated- and segmented-market Cournot equilibria); and (iii) countries gain from small import tariffs and export subsidies, but these gains are less than in the case of segmented markets and a Cournot equilibrium.

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Bibliographic Info

Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 277.

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Date of creation: Oct 1988
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Handle: RePEc:cpr:ceprdp:277

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Keywords: Cournot Equilibrium; Economic Capacity; International Trade; Market Structure; Oligopoly;

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Cited by:
  1. Anderson, S. P. & Schmitt, N. & Thisse, J.-F., . "Who benefits from antidumping legislation?," CORE Discussion Papers RP -1146, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  2. Neary, J Peter & Tharakan, Joe, 2006. "Endogenous Mode of Competition in General Equilibrium," CEPR Discussion Papers 5943, C.E.P.R. Discussion Papers.
  3. Wright, Donald J., 1999. "Optimal patent breadth and length with costly imitation," International Journal of Industrial Organization, Elsevier, vol. 17(3), pages 419-436, April.
  4. Ganslandt, Mattias, 2001. "Strategic Investment and Market Integration," Working Paper Series 560, Research Institute of Industrial Economics.
  5. Neary, J Peter, 2002. "Foreign Direct Investment and the Single Market," CEPR Discussion Papers 3419, C.E.P.R. Discussion Papers.
  6. Linda Hunter & James R. Markusen & Thomas F. Rutherford, 1991. "Trade liberalization in a multinational-dominated industry: a theoretical and applied general equilibrium analysis," Proceedings, Federal Reserve Bank of Dallas, pages 39-42.
  7. Conconi, P., 2000. "Trade Bloc Formation Under Imperfect Competition," The Warwick Economics Research Paper Series (TWERPS) 571, University of Warwick, Department of Economics.
  8. Naranjo, Alberto J., 2010. "Spillover effects of domestic law enforcement policies," International Review of Law and Economics, Elsevier, vol. 30(3), pages 265-275, September.
  9. Alho, Kari, 1990. "Identification of Barriers in International Trade under Imperfect Competition," Working Paper Series 283, Research Institute of Industrial Economics.
  10. José Méndez Naya & Luciano Méndez Naya, 2001. "Subsidios a la producción y efectos derivados de la formación de una unión aduanera," Estudios de Economia, University of Chile, Department of Economics, vol. 28(2 Year 20), pages 249-265, December.
  11. NEARY, J. Peter & THARAKAN, Joe, 2011. "International trade with endogenous mode of competition in general equilibrium," CORE Discussion Papers 2011038, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  12. Goo, Youngwan & Park, Hyun, 2007. "Economic growth and convergence with international differences in technology," Journal of Macroeconomics, Elsevier, vol. 29(1), pages 145-168, March.
  13. Wegberg, M.J.A.M. & Witteloostuijn, A. van, 1992. "Credible entry threats into contestable markets: a multimarket model of contestability," Open Access publications from Tilburg University urn:nbn:nl:ui:12-5373412, Tilburg University.

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