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Oligopolistic Competition, Firm Heterogeneity, and the Impact of International Trade

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  • Haiwen Zhou

    (Department of Economics, Old Dominion University, Norfolk, VA 23529, USA)

Abstract

This paper studies the impact of international trade in a general equilibrium model in which heterogeneous firms engage in oligopolistic competition. An increase of the size of the market leads to a decrease of the equilibrium price and an increase of per capita consumption. The opening of international trade leads to an increased degree of competition, a lower price level, and the exit of least efficient firms. Although average profit increases, not all the surviving firms benefit from the opening of international trade.

Suggested Citation

  • Haiwen Zhou, 2010. "Oligopolistic Competition, Firm Heterogeneity, and the Impact of International Trade," Eastern Economic Journal, Palgrave Macmillan;Eastern Economic Association, vol. 36(1), pages 107-119.
  • Handle: RePEc:pal:easeco:v:36:y:2010:i:1:p:107-119
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    References listed on IDEAS

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    1. Haiwen Zhou, 2007. "Increasing Returns, the Choice of Technology, and the Gains from Trade," Southern Economic Journal, Southern Economic Association, vol. 74(2), pages 581-600, October.
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    3. Haiwen Zhou, 2004. "The division of labor and the extent of the market," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 24(1), pages 195-209, July.
    4. Wulong Gu & Gary Sawchuk & Lori Rennison, 2003. "The effect of tariff reductions on firm size and firm turnover in canadian manufacturing," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 139(3), pages 440-459, September.
    5. J. Peter Neary, 2002. "Globalisation and market structure," Working Papers 200220, School of Economics, University College Dublin.
    6. J.Peter Neary, 2001. "Of Hype and Hyperbolas: Introducing the New Economic Geography," Journal of Economic Literature, American Economic Association, vol. 39(2), pages 536-561, June.
    7. Marc J. Melitz, 2003. "The Impact of Trade on Intra-Industry Reallocations and Aggregate Industry Productivity," Econometrica, Econometric Society, vol. 71(6), pages 1695-1725, November.
    8. Lahiri, Sajal & Ono, Yoshiyasu, 1988. "Helping Minor Firms Reduces Welfare," Economic Journal, Royal Economic Society, vol. 98(393), pages 1199-1202, December.
    9. J. Peter Neary, 2003. "Presidential Address: Globalization and Market Structure," Journal of the European Economic Association, MIT Press, vol. 1(2-3), pages 245-271, 04/05.
    10. Bleaney, Michael & Wakelin, Katherine, 2002. " Efficiency, Innovation and Exports," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 64(1), pages 3-15, February.
    11. Lahiri, Sajal & Ono, Yoshiyasu, 1995. "The Role of Free Entry in an Oligopolistic Heckscher-Ohlin Model," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 36(3), pages 609-624, August.
    12. Montagna, Catia, 1995. "Monopolistic Competition with Firm-Specific Costs," Oxford Economic Papers, Oxford University Press, vol. 47(2), pages 318-328, April.
    13. Roberts, Mark J & Tybout, James R, 1997. "The Decision to Export in Colombia: An Empirical Model of Entry with Sunk Costs," American Economic Review, American Economic Association, vol. 87(4), pages 545-564, September.
    14. Haiwen Zhou, 2007. "Oligopolistic Competition And Economic Geography," Journal of Regional Science, Wiley Blackwell, vol. 47(5), pages 915-933.
    15. Jeffrey G. Williamson, 2006. "Globalization and the Poor Periphery before 1950," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262232502, January.
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    Cited by:

    1. repec:fec:journl:v:12:y:2017:i:4:p:660-676 is not listed on IDEAS
    2. Yu Chen & Haiwen Zhou, 2017. "An Overlapping-Generations Model of Firm Heterogeneity in Economic Development," Frontiers of Economics in China, Higher Education Press, vol. 12(4), pages 660-676, December.
    3. Colacicco, Rudy, 2012. "The "Average" Within-Sector Firm Heterogeneity in General Oligopolistic Equilibrium," MPRA Paper 40212, University Library of Munich, Germany.

    More about this item

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F15 - International Economics - - Trade - - - Economic Integration

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