The Social Costs of Monopoly in an Open Economy
In a small open economy trading perfect substitutes at given world-market prices, monopoly power cannot exist unless the domestic market is protected. This assessment of monopoly changes radically if we relax the small-country assumption and/or the assumption that imports are perfect substitutes of domestic goods. In either case, a domestic monopoly retains some market power even in the absence of protection. In an open economy there is the familiar monopoly welfare loss due to underconsumption and a new loss due to excessive importation.
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Volume (Year): 17 (1984)
Issue (Month): 4 (November)
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