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Trade Patterns And Export Pricing Under Non-Ces Preferences

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  • Sergey Kichko

    ()
    (National Research University Higher School of Economics)

  • Sergey Kokovin

    ()
    (National Research University Higher School of Economics)

  • Evgeny Zhelobodko

    (National Research University Higher School of Economics)

Abstract

We develop a two-factor, two-sector trade model of monopolistic competition with variable elasticity of substitution. Firms' profits and sizes may increase or decrease with market integration depending on the degree of asymmetry between countries. The country in which capital is relatively abundant is a net exporter of the manufactured good, although both firm sizes and profits are lower in this country than in the country where capital is relatively scarce. The pricing policy adopted by firms neither depends on capital endowment nor country asymmetry. It is determined by the nature of preferences: when demand elasticity increases (decreases) with consumption, firms practice dumping (reverse-dumping)

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Bibliographic Info

Paper provided by National Research University Higher School of Economics in its series HSE Working papers with number WP BRP 54/EC/2014.

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Length: 45 pages
Date of creation: 2014
Date of revision:
Publication status: Published in WP BRP Series: Economics / EC, March 2014, pages 1-45
Handle: RePEc:hig:wpaper:54/ec/2014

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Keywords: international trade; monopolistic competition; capital asymmetry; variable markups;

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References

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Cited by:
  1. Pokrovsky Dmitry & Behrens Kristian & Zhelobodko Evgeny, 2014. "Market Size, Entrepreneurship, and Income Inequality," EERC Working Paper Series 14/01e, EERC Research Network, Russia and CIS.

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