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On the Persistence of Leadership or Leapfrogging in International Trade

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Author Info

  • Massimo MOTTA
  • Jean-François THISSE
  • Antonio CABRALES

Abstract

When two countries starting from different quality levels (reflecting different conditions on domestic market demands) open to trade, two possible equilibria arise. In the first one, the quality leader maintains its position. In the second, leapfrogging occurs. However, the latter is possible only if the initial quality gap is not too wide. Further, when the risk dominance criterion is used, only the former equilibrium is selected.

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Bibliographic Info

Paper provided by Université de Lausanne, Faculté des HEC, DEEP in its series Cahiers de Recherches Economiques du Département d'Econométrie et d'Economie politique (DEEP) with number 9625.

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Length: 19 pages
Date of creation: Dec 1996
Date of revision:
Publication status: Published in International Economic Review, vol. 38 (4), pp. 809-824
Handle: RePEc:lau:crdeep:9625

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Postal: Université de Lausanne, Faculté des HEC, DEEP, Internef, CH-1015 Lausanne
Phone: ++41 21 692.33.64
Fax: ++41 21 692.33.05
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Web page: http://www.hec.unil.ch/deep/publications/cahiers/series
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Related research

Keywords: international trade; product differentiation; country asymmetries; integrated markets; segmented markets; equilibrium section;

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