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Oligopoly in international trade: Rise, fall and resurgence

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  • Keith Head
  • Barbara J. Spencer

Abstract

Large firms played a central role in the new trade models that became a major focus of trade economists in the early 1980s. Subsequent literature for the most part kept imperfect competition but jettisoned oligopoly. Instead, as the heterogeneous firms literature burgeoned in the 2000s, monopolistic competition quickly became established as the workhorse model. The use of oligopoly in trade models has been criticized for reasons that we argue are unpersuasive. Renewed incorporation of oligopolistic firms in international trade is warranted. Quantitative investigations of welfare effects of trade policy should again address the impact of such policies on the allocation of profits across countries.

Suggested Citation

  • Keith Head & Barbara J. Spencer, 2017. "Oligopoly in international trade: Rise, fall and resurgence," Canadian Journal of Economics, Canadian Economics Association, vol. 50(5), pages 1414-1444, December.
    • Handle: RePEc:cje:issued:v:50:y:2017:i:5:p:1414-1444
    DOI: 10.1111/caje.12303
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    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation

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