Sub-national differentiation and the role of the firm in optimal international pricing
We illuminate the relationship between optimal firm pricing and optimal trade policy by exploring a generalized model that accommodates product differentiation at both the national and sub-national (firm) levels. We assume monopolistic competition in the differentiated products at the sub-national level. When the national and sub-national substitution elasticities are similar we find little opportunity for small countries to improve their terms of trade through trade distortions, because firms play an important preemptive role in optimally pricing unique varieties. We contrast this with standard applications of perfect-competition Armington models, which exhibit high optimal tariffs--even for relatively small countries.
(This abstract was borrowed from another version of this item.)
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Markusen, James R., 1990. "Derationalizing tariffs with specialized intermediate inputs and differentiated final goods," Journal of International Economics, Elsevier, vol. 28(3-4), pages 375-383, May.
- Markusen, James R., 2002.
"Multinational Firms and the Theory of International Trade,"
8380, University Library of Munich, Germany.
- James R. Markusen, 2004. "Multinational Firms and the Theory of International Trade," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262633078, June.
- Rutherford, Thomas F, 1999. "Applied General Equilibrium Modeling with MPSGE as a GAMS Subsystem: An Overview of the Modeling Framework and Syntax," Computational Economics, Society for Computational Economics, vol. 14(1-2), pages 1-46, October.
- Drusilla K. Brown & Kozo Kiyota & Robert M. Stern, 2005.
"Computational Analysis of the US FTAs with Central America, Australia and Morocco,"
The World Economy,
Wiley Blackwell, vol. 28(10), pages 1441-1490, October.
- Drusilla K. Brown & Kozo Kiyota & Robert M. Stern, 2005. "Computational Analysis of the U.S FTAs with Central America, Australia, And Morocco," Working Papers 527, Research Seminar in International Economics, University of Michigan.
- J. P. Neary (ed.), 1995. "International Trade," Books, Edward Elgar, volume 0, number 575.
- Brown, Drusilla K., 1987. "Tariffs, the terms of trade, and national product differentiation," Journal of Policy Modeling, Elsevier, vol. 9(3), pages 503-526.
- Russell H. Hillberry & Michael A. Anderson & Edward J. Balistreri & Alan K. Fox, 2005. "Taste Parameters as Model Residuals: Assessing the "Fit" of an Armington Trade Model," Review of International Economics, Wiley Blackwell, vol. 13(5), pages 973-984, November.
- Markusen, James R. & Melvin, James R. & Maskus, Keith E. & Kaempfer, William, 1995. "International trade: theory and evidence," MPRA Paper 21989, University Library of Munich, Germany.
- Markusen, James R & Wigle, Randall M, 1989. "Nash Equilibrium Tariffs for the United States and Canada: The Roles of Country Size, Scale Economies, and Capital Mobility," Journal of Political Economy, University of Chicago Press, vol. 97(2), pages 368-86, April.
- Drusilla K. Brown & Alan V. Deardorff & Robert M. Stern, 1992.
"A North American Free Trade Agreement: Analytical Issues and a Computational Assessment,"
The World Economy,
Wiley Blackwell, vol. 15(1), pages 11-30, 01.
- Brown, D.K. & Deardorff, A.V. & Stern, R.M., 1991. "A North American Free Trade Agreement: Analytical Issues and A Computational Assessment," Working Papers 289, Research Seminar in International Economics, University of Michigan.
- Trefler, Daniel, 1995. "The Case of the Missing Trade and Other Mysteries," American Economic Review, American Economic Association, vol. 85(5), pages 1029-46, December.
- Flam, Harry & Helpman, Elhanan, 1987. "Industrial policy under monopolistic competition," Journal of International Economics, Elsevier, vol. 22(1-2), pages 79-102, February.
When requesting a correction, please mention this item's handle: RePEc:eee:ecmode:v:26:y:2009:i:1:p:47-62. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.