Cournot-Nash Competition in a General Equilibrium Model of International Trade
AbstractWe use the two-factor, two-sector, two-country model of Melvin and Warne (1973) and Markusen (1981), in which the production of one good is monopolized in each country, in order to investigate the role of the price normalization. We illustrate several puzzling effects that occur if the price normalization is changed. However, we show that Markusen’s result on the direction of the trade flow between two proportional countries with constant returns to scale is robust with respect to the choice of the normalization rule. To overcome the price normalization problem in international trade we suggest to use the concept of real wealth maximization.
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Bibliographic InfoPaper provided by University of Copenhagen. Department of Economics in its series Discussion Papers with number 03-28.
Length: 21 pages
Date of creation: May 2003
Date of revision:
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More information through EDIRC
international trade with imperfect competition; price normalization; real wealth maximization;
Other versions of this item:
- Egbert Dierker & Hildegard Dierker & Birgit Grodal, 2003. "Cournot-Nash Competition in a General Equilibrium Model of International Trade," Vienna Economics Papers 0208, University of Vienna, Department of Economics.
- Egbert Dierker & Hildegard Dierker & Birgit Grodal, 2003. "Cournot-Nash Competition in a General Equilibrium Model of International Trade," Vienna Economics Papers 0308, University of Vienna, Department of Economics.
- D43 - Microeconomics - - Market Structure and Pricing - - - Oligopoly and Other Forms of Market Imperfection
- F11 - International Economics - - Trade - - - Neoclassical Models of Trade
- F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
This paper has been announced in the following NEP Reports:
- NEP-ALL-2003-06-16 (All new papers)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Markusen, James R., 1981. "Trade and the gains from trade with imperfect competition," Journal of International Economics, Elsevier, vol. 11(4), pages 531-551, November.
- Dierker, Egbert & Grodal, Birgit, 1998. " Modelling Policy Issues in a World of Imperfect Competition," Scandinavian Journal of Economics, Wiley Blackwell, vol. 100(1), pages 153-79, March.
- R. Melvin, James & Warne, Robert D., 1973. "Monopoly and the theory of international trade," Journal of International Economics, Elsevier, vol. 3(2), pages 117-134, May.
- Lutz Arnold, 2013. "Existence of equilibrium in the Helpman–Krugman model of international trade with imperfect competition," Economic Theory, Springer, vol. 52(1), pages 237-270, January.
- Onur A. Koska & Frank Stähler, 2011. "Trade and Imperfect Competition in General Equilibrium," CESifo Working Paper Series 3543, CESifo Group Munich.
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