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A Simple Model of Foreign Brand Penetration under Monopolistic Competition

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Author Info
Toru Kikuchi

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Abstract

The main purpose of this study is to illustrate, with a simple monopolistic competition trade model, how trade liberalization (i.e., a decline in trade costs) can affect domestic entrepreneurs’ decisions between domestic brands and foreign brands, and thus the degree of foreign brand penetration. It is shown that, as trade costs decrease, more entrepreneurs choose to provide foreign brands. However, the impact of trade liberalization (in terms of changes in profit levels) becomes smaller as more entrepreneurs switch to foreign brands.

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Publisher Info
Paper provided by Economics and Econometrics Research Institute (EERI) in its series EERI Research Paper Series with number EERI_RP_2009_14.

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Length: 18 pages
Date of creation: 08 2009
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Handle: RePEc:eei:rpaper:eeri_rp_2009_14

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Related research
Keywords: Foreign brand penetration; trade liberalization; monopolistic competition.;

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Find related papers by JEL classification:
F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies

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References listed on IDEAS
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  1. Elhanan Helpman, 2006. "Trade, FDI, and the Organization of Firms," Journal of Economic Literature, American Economic Association, vol. 44(3), pages 589-630, September.
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  2. Marjit, Sugata & Beladi, Hamid & Kabiraj, Tarun, 2007. "Brand name collaboration and optimal tariff," Economic Modelling, Elsevier, vol. 24(4), pages 636-647, July. [Downloadable!] (restricted)
  3. Ono, Yoshiyasu, 1990. "Foreign penetration and national welfare under oligopoly," Japan and the World Economy, Elsevier, vol. 2(2), pages 141-154, June. [Downloadable!] (restricted)
  4. Kiminori Matsuyama, 1995. "Complementarities and Cumulative Processes in Models of Monopolistic Competition," Journal of Economic Literature, American Economic Association, vol. 33(2), pages 701-729, June. [Downloadable!] (restricted)
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  5. Martin Richardson, 1998. "Foreign entry and domestic welfare," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 134(2), pages 250-262, June. [Downloadable!] (restricted)
  6. Dixit, Avinash K & Stiglitz, Joseph E, 1977. "Monopolistic Competition and Optimum Product Diversity," American Economic Review, American Economic Association, vol. 67(3), pages 297-308, June. [Downloadable!] (restricted)
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This page was last updated on 2009-12-2.

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