IDEAS home Printed from
   My bibliography  Save this article

Perfect competition and intra-industry trade


  • Cukrowski, Jacek
  • Aksen, Ernest


The paper presents a formal study of how risk aversion can be applied to analysis of international trade. It seeks to illustrate, amongst other things, that risk-averse firms operating in perfectly competitive markets with uncertainty of demand tend to diversify markets and that this provides the basis for international trade in identical commodities between identical countries. The paper argues that such trade may be welfare-improving, despite efficiency losses due to cross-hauling and transportation costs. Moreover, the analysis shows that reduction of tariff per unit of imported goods (e.g., due to the organization of custom unions) increases trade flows but does not necessarily improve total welfare. Therefore, in some particular cases, the use of sophisticated government intervention can lead to better outcomes than can free trade. 5
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Cukrowski, Jacek & Aksen, Ernest, 2003. "Perfect competition and intra-industry trade," Economics Letters, Elsevier, vol. 78(1), pages 101-108, January.
  • Handle: RePEc:eee:ecolet:v:78:y:2003:i:1:p:101-108

    Download full text from publisher

    File URL:
    Download Restriction: Full text for ScienceDirect subscribers only

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    1. Krugman, Paul, 1980. "Scale Economies, Product Differentiation, and the Pattern of Trade," American Economic Review, American Economic Association, vol. 70(5), pages 950-959, December.
    2. Sandmo, Agnar, 1971. "On the Theory of the Competitive Firm under Price Uncertainty," American Economic Review, American Economic Association, vol. 61(1), pages 65-73, March.
    3. Appelbaum, Elie & Katz, Eliakim, 1986. "Measures of Risk Aversion and Comparative Statics of Industry Equilibrium," American Economic Review, American Economic Association, vol. 76(3), pages 524-529, June.
    4. Leland, Hayne E, 1972. "Theory of the Firm Facing Uncertain Demand," American Economic Review, American Economic Association, vol. 62(3), pages 278-291, June.
    5. Brander, James A., 1981. "Intra-industry trade in identical commodities," Journal of International Economics, Elsevier, vol. 11(1), pages 1-14, February.
    Full references (including those not matched with items on IDEAS)


    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.

    Cited by:

    1. Gormsen, Christian, 2009. "Intransparent Markets and Intra-Industry Trade," Working Papers 09-20, University of Aarhus, Aarhus School of Business, Department of Economics.

    More about this item


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:ecolet:v:78:y:2003:i:1:p:101-108. 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: (Dana Niculescu). General contact details of provider: .

    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 CitEc recognized a reference but did not link an item in RePEc 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 RePEc Author Service 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.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.