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A Simple Model of Foreign Brand Penetration under Monopolistic Competition

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  • Toru Kikuchi

    ()
    (Graduate School of Economics, Kobe University)

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 profitt levels) becomes smaller as more entrepreneurs switch to foreign brands.

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File URL: http://www.econ.kobe-u.ac.jp/RePEc/koe/wpaper/2009/0910.pdf
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Bibliographic Info

Paper provided by Graduate School of Economics, Kobe University in its series Discussion Papers with number 0910.

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Length: 17pages
Date of creation: Jul 2009
Date of revision:
Handle: RePEc:koe:wpaper:0910

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Web page: http://www.econ.kobe-u.ac.jp
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Keywords: Foreign brand penetration; trade liberalization; monopolistic competition;

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  1. Roy, Santanu & Viaene, Jean-Marie, 1998. "Preferences, Country Bias, and International Trade," Review of International Economics, Wiley Blackwell, vol. 6(2), pages 204-19, May.
  2. Elhanan Helpman, 2006. "Trade, FDI, and the Organization of Firms," Harvard Institute of Economic Research Working Papers 2118, Harvard - Institute of Economic Research.
  3. D. Neven & G. Norman & Jacques-Francois Thisse, 1991. "Attitudes toward Foreign Products and International Price Competition," Canadian Journal of Economics, Canadian Economics Association, vol. 24(1), pages 1-11, February.
  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.
  5. Warren J Bilkey & Erik Nes, 1982. "Country-of-Origin Effects on Product Evaluations," Journal of International Business Studies, Palgrave Macmillan, vol. 13(1), pages 89-100, March.
  6. Martin Richardson, 1998. "Foreign entry and domestic welfare," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 134(2), pages 250-262, June.
  7. Paul M. Romer, 1994. "New Goods, Old Theory, and the Welfare Costs of Trade Restrictions," NBER Working Papers 4452, National Bureau of Economic Research, Inc.
  8. 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.
  9. Ono, Yoshiyasu, 1990. "Foreign penetration and national welfare under oligopoly," Japan and the World Economy, Elsevier, vol. 2(2), pages 141-154, June.
  10. Jiunn-Rong Chiou & Jin-Li Hu & Yan-Shu Lin, 2003. "“Buy Domestic” Campaigns and Optimal Tariffs," Journal of Economics, Springer, vol. 80(2), pages 143-160, October.
  11. Marjit, Sugata & Beladi, Hamid & Kabiraj, Tarun, 2007. "Brand name collaboration and optimal tariff," Economic Modelling, Elsevier, vol. 24(4), pages 636-647, July.
  12. James E. Rauch, 2001. "Business and Social Networks in International Trade," Journal of Economic Literature, American Economic Association, vol. 39(4), pages 1177-1203, December.
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