Comparative advantage under oligopoly
We analyze the principle of comparative advantage when agents in the world market are aware of the influence their individual supply exerts on the equilibrium exchange rate of goods. We show that specialization following comparative disadvantage can be an oligopoly equilibrium in a Ricardian economy. Moreover, for a wide class of economies, it is the only one. Nonetheless, when the number of agents in each country increases without limit, the equilibrium in which specialization follows comparative advant.age again obtains.
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