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Cost Uncertainty and Trade Liberalization in International Oligopoly


    (CORE, Université catholique de Louvain, B-1348 Louvain-la-Neuve, Belgium an Universitat de Valencia, Spain)

In a game of incomplete information about costs we investigate conditions under which autarkic firms benefit from the opening of trade, both when the number of firms is exogenously and endogenously fixed. A social point of view is also taken to check under which circumstances bilateral trade liberalization is to both countries' advantage. We show that there may be cases when free trade is privately and socially favourable compared to the autarky situation. Typically everybody's interests harmonize for a certain degree of firms' diversification and a sufficiently large amount of uncertainty.

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Paper provided by Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) in its series CORE Discussion Papers with number 1995068.

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Date of creation: 01 Dec 1995
Date of revision:
Handle: RePEc:cor:louvco:1995068
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  1. ANDERSON, Simon P. & DONSIMONI, Marie-Paule & GABSZEWICZ, Jean J., . "Is international trade profitable to oligopolistic industries?," CORE Discussion Papers RP 865, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  2. Brander, James & Krugman, Paul, 1983. "A 'reciprocal dumping' model of international trade," Journal of International Economics, Elsevier, vol. 15(3-4), pages 313-321, November.
  3. MONER COLONQUES , Rafael, 1995. "Cost Uncertainty and Trade Liberalization in International Oligopoly," CORE Discussion Papers 1995068, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  4. Markusen, James R. & Venables, Anthony J., 1988. "Trade policy with increasing returns and imperfect competition : Contradictory results from competing assumptions," Journal of International Economics, Elsevier, vol. 24(3-4), pages 299-316, May.
  5. CORDELLA, Tito, . "Trade liberalization and oligopolistic industries: a welfare appraisal," CORE Discussion Papers RP 1049, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  6. Brander, James A. & Spencer, Barbara J., 1985. "Export subsidies and international market share rivalry," Journal of International Economics, Elsevier, vol. 18(1-2), pages 83-100, February.
  7. Lael S. Brainard & David Martimort, 2011. "Strategic Trade Policy with Incompletly Informed Policymakers," Post-Print halshs-00754881, HAL.
  8. Jonathan Eaton & Gene M. Grossman, 1983. "Optimal Trade and Industrial Policy Under Oligopoly," NBER Working Papers 1236, National Bureau of Economic Research, Inc.
  9. Carl Shapiro, 1986. "Exchange of Cost Information in Oligopoly," Review of Economic Studies, Oxford University Press, vol. 53(3), pages 433-446.
  10. 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.
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