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Market Access and International Competition: A Simulation Study of 16K Random Access Memories

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  • Richard E. Baldwin
  • Paul Krugman

Abstract

This paper develops a model of international competition in an oligopoly characterized by strong learning effects. The model is quantified by calibrating its parameters to reproduce the US-Japanese rivalry in 16K R.A.Ms from 1978-1983. We then ask the following question: how much did the apparent closure of the Japanese market to imports affect Japan's export performance? A simulation analysis suggests that a protected home market was a crucial advantage to Japanese firms, which would otherwise have been uncompetitive both at home and abroad. We find, however, that Japan's home market protection nonetheless produced more costs than benefits for Japan.

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File URL: http://www.nber.org/papers/w1936.pdf
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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 1936.

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Date of creation: May 1986
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Publication status: published as in Empirical Methods for International Trade, (ed)R. Feenstra. MIT Press, 1987.
Handle: RePEc:nbr:nberwo:1936

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  1. Drew Fudenberg & Jean Tirole, 1983. "Learning-by-Doing and Market Performance," Bell Journal of Economics, The RAND Corporation, vol. 14(2), pages 522-530, Autumn.
  2. Brander, James A., 1981. "Intra-industry trade in identical commodities," Journal of International Economics, Elsevier, vol. 11(1), pages 1-14, February.
  3. A. M. Spence, 1981. "The Learning Curve and Competition," Bell Journal of Economics, The RAND Corporation, vol. 12(1), pages 49-70, Spring.
  4. James A. Brander & Paul Krugman, 1983. "A 'Reciprocal Dumping' Model of International Trade," NBER Working Papers 1194, National Bureau of Economic Research, Inc.
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