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The Loss from Trade under International Cournot Oligopoly with Cost Asymmetry

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  • Baomin Dong
  • Lasheng Yuan

Abstract

This paper examines the efficiency and welfare effects of intra-industry trade in the presence of imperfect competition and heterogeneous technologies. We show that when a Southern country has a relatively less concentrated industry and faces low demand, the output of the Northern country may contract after initiating trade. Production inefficiencies can outweigh the gain effected by trade-induced competition and lower price in trade, resulting in a net loss in the global welfare. In some circumstances, voluntary technology transfer, managed trade through VERs, or the introduction of a tariff can improve both trading partners' welfare. Copyright © 2010 Blackwell Publishing Ltd.

Suggested Citation

  • Baomin Dong & Lasheng Yuan, 2010. "The Loss from Trade under International Cournot Oligopoly with Cost Asymmetry," Review of International Economics, Wiley Blackwell, vol. 18(5), pages 818-831, November.
  • Handle: RePEc:bla:reviec:v:18:y:2010:i:5:p:818-831
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    References listed on IDEAS

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    Cited by:

    1. Leal, Mariel & Garcia, Arturo & Lee, Sang-Ho, 2017. "Effects of globalizing a consumer-friendly firm into an asymmetric mixed duopoly," MPRA Paper 83512, University Library of Munich, Germany.
    2. Rabah Amir & Jim Y. Jin & Michael Troge, 2015. "Free Trade vs. Autarky under Asymmetric Cournot Oligopoly," Discussion Paper Series, Department of Economics 201509, Department of Economics, University of St. Andrews.
    3. repec:bla:reviec:v:25:y:2017:i:1:p:98-107 is not listed on IDEAS

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