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.
|Date of creation:||Sep 2001|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: 44 - 20 - 7183 8801
Fax: 44 - 20 - 7183 8820
|Order Information:|| Email: |
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.:
- Economides, Nicholas, 1984. "The principle of minimum differentiation revisited," European Economic Review, Elsevier, vol. 24(3), pages 345-368, April.
- 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.
- 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, . "Trade liberalization and oligopolistic industries: a welfare appraisal," CORE Discussion Papers RP 1049, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Tito Cordella, 1990. "Trade Liberalizaiton and Oligopolistic Industries: a Welfare Appraisal," Working Papers 100, Dipartimento Scienze Economiche, Universita' di Bologna.
- 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.
- repec:oup:qjecon:v:112:y:1997:i:4:p:1027-56 is not listed on IDEAS
- Steven C. Salop, 1979. "Monopolistic Competition with Outside Goods," Bell Journal of Economics, The RAND Corporation, vol. 10(1), pages 141-156, Spring.
- 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 235-43, June.
- Krugman, Paul, 1980. "Scale Economies, Product Differentiation, and the Pattern of Trade," American Economic Review, American Economic Association, vol. 70(5), pages 950-59, December.
- 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.
- 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.
- Motta, Massimo, 1992.
"Sunk Costs and Trade Liberalisation,"
Royal Economic Society, vol. 102(412), pages 578-87, May.
- 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.
- Greenhut,Melvin L. & Norman,George & Hung,Chao-Shun, 1987. "The Economics of Imperfect Competition," Cambridge Books, Cambridge University Press, number 9780521305525.
- Greenhut,Melvin L. & Norman,George & Hung,Chao-Shun, 1987. "The Economics of Imperfect Competition," Cambridge Books, Cambridge University Press, number 9780521315647.
- d'ASPREMONT, Claude & GABSZEWICZ, Jean J. & THISSE,Â Jacques-FranÃ§ois, .
"On Hotelling's "Stability in competition","
CORE Discussion Papers RP
385, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- 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:cpr:ceprdp:2938. 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: ()The email address of this maintainer does not seem to be valid anymore. Please ask to update the entry or send us the correct address
If references are entirely missing, you can add them using this form.