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A Product Line Life Cycle Model of Intra-industry Trade

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  • William Milberg

Abstract

This paper develops a technology-gap model of intraindustry trade in oligopoly industries with megacorp pricing. Firms maximize market share by choosing available products in the product line. They produce subject to a product life cycle and a constraint that the markup over average costs must be sufficient to generate funds for investment in capacity replacement, capacity expansion to meet market growth, and for product innovation. The argument shows that research and development expenditures are a necessary form of ongoing investment, not a discretionary item as is implicit in much of the literature on the theory of the firm.

Suggested Citation

  • William Milberg, 1988. "A Product Line Life Cycle Model of Intra-industry Trade," Eastern Economic Journal, Eastern Economic Association, vol. 14(4), pages 389-397, Oct-Dec.
    • Handle: RePEc:eej:eeconj:v:14:y:1988:i:4:p:389-397
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    File URL: http://web.holycross.edu/RePEc/eej/Archive/Volume14/V14N4P389_397.pdf
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    References listed on IDEAS

    as
    1. H. Gray, 1973. "Two-Way international trade in manufactures: A theoretical underpinning," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 109(1), pages 19-39, March.
    2. 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.
    3. Ethier, Wilfred, 1979. "Internationally decreasing costs and world trade," Journal of International Economics, Elsevier, vol. 9(1), pages 1-24, February.
    4. Gary Hufbauer, 1970. "The Impact of National Characteristics & Technology on the Commodity Composition of Trade in Manufactured Goods," NBER Chapters, in: The Technology Factor in International Trade, pages 145-231, National Bureau of Economic Research, Inc.
    5. Helpman, Elhanan, 1981. "International trade in the presence of product differentiation, economies of scale and monopolistic competition : A Chamberlin-Heckscher-Ohlin approach," Journal of International Economics, Elsevier, vol. 11(3), pages 305-340, August.
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