The importance of being small. Or when countries are areas and not points
Market size and transport costs are important ingredients of international trade. We propose to look at these issues from a different perspective. Using a Hotelling duopoly model with quadratic transport costs, we analyse the welfare effects of international trade between two countries that differ only in size. Our results indicate that in most cases free trade will lead to a decrease in prices. Furthermore, the firm of the small country will benefit from market expansion. Finally, the model predicts that the small country benefits from a move towards free trade whereas the opening to trade may hurt the large country.
(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.:
- Steven C. Salop, 1979. "Monopolistic Competition with Outside Goods," Bell Journal of Economics, The RAND Corporation, vol. 10(1), pages 141-156, Spring.
- Ohsawa, Yoshiaki, 1999. "Cross-border shopping and commodity tax competition among governments," Regional Science and Urban Economics, Elsevier, vol. 29(1), pages 33-51, January.
- Markusen, James R., 1981. "Trade and the gains from trade with imperfect competition," Journal of International Economics, Elsevier, vol. 11(4), pages 531-551, November.
- Tito CORDELLA, 1996. "On the possibility of a perverse effect of intra-industry trade," Discussion Papers (REL - Recherches Economiques de Louvain) 1996021, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
- Shachmurove, Yochanan & Spiegel, Uriel, 1995. "On Nations' Size and Transportation Costs," Review of International Economics, Wiley Blackwell, vol. 3(2), pages 235-243, June.
- d'ASPREMONT, Claude & GABSZEWICZ, Jean J. & THISSE, Jacques-François, "undated".
"On Hotelling's "Stability in competition","
CORE Discussion Papers RP
385, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Alberto Alesina & Enrico Spolaore, 1997.
"On the Number and Size of Nations,"
The Quarterly Journal of Economics,
Oxford University Press, vol. 112(4), pages 1027-1056.
- Antonio Cabrales & Massimo Motta, 1996.
"Country asymmetries, endogenous product choice and the speed of trade liberalization,"
Economics Working Papers
259, Department of Economics and Business, Universitat Pompeu Fabra, revised Jan 1998.
- Cabrales, Antonio & Motta, Massimo, 1996. "Country Asymmetries, Endogenous Product Choice and the Speed of Trade Liberalization," CEPR Discussion Papers 1326, C.E.P.R. Discussion Papers.
- Deardorff, Alan V., 1984. "Testing trade theories and predicting trade flows," Handbook of International Economics, in: R. W. Jones & P. B. Kenen (ed.), Handbook of International Economics, edition 1, volume 1, chapter 10, pages 467-517 Elsevier.
- Motta, Massimo, 1992.
"Sunk Costs and Trade Liberalisation,"
Royal Economic Society, vol. 102(412), pages 578-587, May.
- Tito CORDELLA, 1993.
"Trade Liberalization and Oligopolistic Industries : A Welfare Appraisal,"
Discussion Papers (REL - Recherches Economiques de Louvain)
1993033, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
- CORDELLA, Tito, "undated". "Trade liberalization and oligopolistic industries: a welfare appraisal," CORE Discussion Papers RP 1049, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- T. Cordella, 1990. "Trade Liberalizaiton and Oligopolistic Industries: a Welfare Appraisal," Working Papers 100, Dipartimento Scienze Economiche, Universita' di Bologna.
- 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.
- Greenhut,Melvin L. & Norman,George & Hung,Chao-Shun, 1987. "The Economics of Imperfect Competition," Cambridge Books, Cambridge University Press, number 9780521305525, December.
- Economides, Nicholas, 1984. "The principle of minimum differentiation revisited," European Economic Review, Elsevier, vol. 24(3), pages 345-368, April.
- Greenhut,Melvin L. & Norman,George & Hung,Chao-Shun, 1987. "The Economics of Imperfect Competition," Cambridge Books, Cambridge University Press, number 9780521315647, December.
- Schmitt, Nicolas, 1995. "Product Imitation, Product Differentiation and International Trade," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 36(3), pages 583-608, August.
When requesting a correction, please mention this item's handle: RePEc:eee:regeco:v:32:y:2002:i:3:p:381-408. 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)
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.