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Competition for firms in an oligopolistic industry: The impact of economic integration

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  • Haufler, Andreas
  • Wooton, Ian

Abstract

We set up a model of generalised oligopoly where two countries of different size compete for an exogenous, but variable, number of identical firms. The model combines a desire by national governments to attract internationally mobile firms with the existence of location rents that arise even in a symmetric equilibrium where firms are dispersed. As economic integration proceeds, equilibrium taxes initially decline, but then rise again as trade costs fall even further. A range of trade costs is identified where economic integration raises the welfare of the small country, but lowers welfare in the large country.

Suggested Citation

  • Haufler, Andreas & Wooton, Ian, 2010. "Competition for firms in an oligopolistic industry: The impact of economic integration," Munich Reprints in Economics 19925, University of Munich, Department of Economics.
  • Handle: RePEc:lmu:muenar:19925
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    16. repec:dgr:uvatin:20070030 is not listed on IDEAS
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