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Trading Blocs and Market Performance under Duopolistic Competition


  • Hacker, R. Scott

    () (Jönköping International Business SchoolJönköping, Sweden)

  • Hussain, Qaizar

    () (International Monetary Fund)


This paper uses a three-country duopoly model to examine the effects of lowered trade barriers when a new entrant joins a trading bloc. There are two firms - a small-country firm and a large-country firm within the bloc - and three markets -two within and one (new entrant) outside the bloc. The results from trade bloc expansion vary for when marginal cost is falling with respect to output, but are clear when marginal cost is rising. In the latter case, profits improve more for the small-country firm than for the large-country firm. Consequences on prices, production, and trade are also considered.

Suggested Citation

  • Hacker, R. Scott & Hussain, Qaizar, 2005. "Trading Blocs and Market Performance under Duopolistic Competition," Journal of Economic Integration, Center for Economic Integration, Sejong University, vol. 20, pages 294-317.
  • Handle: RePEc:ris:integr:0316

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    More about this item


    Trading Blocs; Trade Barriers; Trade Expansion; Duopoly; Oligopoly; Tariffs;

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • D60 - Microeconomics - - Welfare Economics - - - General
    • F10 - International Economics - - Trade - - - General
    • F15 - International Economics - - Trade - - - Economic Integration


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