IDEAS home Printed from
MyIDEAS: Login to save this paper or follow this series

Market Integration, Choice of Technology and Welfare

  • J¿rgen Drud Hansen

    (Department of Economics, Aarhus School of Business)

  • J¿rgen Ulff-M¿ller Nielsen


    (Department of Economics, Aarhus School of Business)

Registered author(s):

    This paper develops an international trade model where firms in a duopoly may diversify their technologies for strategic reasons. The firms face the same set of technologies given by a trade-off between marginal costs and fixed costs, but depending on trade costs the firms may choose different technologies. Market integration may induce a technological restructuring where the firms either diversify their technologies or switch to a homogenous technology leaving jumps in welfare both in the home and foreign country. It is shown that with respect to global welfare Cournot Nash equilibria with homogeneous firms are in some cases inferior to Cournot Nash equilibria with heterogeneous firms. A small decrease in trade costs, which induces a switch from heterogeneous technologies to a homogeneous technology, reduces global welfare. Extensive reductions in trade costs allow for the traditional positive global welfare effects of market integration.

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

    File URL:
    Our checks indicate that this address may not be valid because: 404 Not Found ( [301 Moved Permanently]--> If this is indeed the case, please notify (Janet Bryant)

    File Function: First version, 2007
    Download Restriction: no

    Paper provided by University of Otago, Department of Economics in its series Working Papers with number 0711.

    in new window

    Length: 28 pages
    Date of creation: Apr 2007
    Date of revision: Apr 2007
    Handle: RePEc:otg:wpaper:0711
    Contact details of provider: Postal: P.O. Box 56, Dunedin
    Phone: +64 3 479 8725
    Fax: 64 3 479 8171
    Web page:

    More information through EDIRC

    References listed on IDEAS
    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.:

    as in new window
    1. J Bradford Jensen & Andrew B Bernard, 2001. "Why Some Firms Export," Working Papers 01-05, Center for Economic Studies, U.S. Census Bureau.
    2. Eckel, Carsten & Neary, J Peter, 2006. "Multi-Product Firms and Flexible Manufacturing in the Global Economy," CEPR Discussion Papers 5941, C.E.P.R. Discussion Papers.
    3. Sajal Lahiri and Yoshiyasu Ono, . "Asymmetric Oligopoly, International Trade, and Welfare: Synthesis," Economics Discussion Papers 435, University of Essex, Department of Economics.
    4. Mills, David E. & Smith, William, 1996. "It pays to be different: Endogenous heterogeneity of firms in an oligopoly," International Journal of Industrial Organization, Elsevier, vol. 14(3), pages 317-329, May.
    5. Montagna, Catia, 2001. "Efficiency Gaps, Love of Variety and International Trade," Economica, London School of Economics and Political Science, vol. 68(269), pages 27-44, February.
    6. Rod Falvey, 1998. "Mergers in Open Economies," The World Economy, Wiley Blackwell, vol. 21(8), pages 1061-1076, November.
    7. Mark J. Melitz, 2002. "The Impact of Trade on Intra-Industry Reallocations and Aggregate Industry Productivity," NBER Working Papers 8881, National Bureau of Economic Research, Inc.
    8. repec:bla:restud:v:77:y:2010:i:1:p:188-217 is not listed on IDEAS
    9. Schmitt, Nicolas & Yu, Zhihao, 2001. "Economies of scale and the volume of intra-industry trade," Economics Letters, Elsevier, vol. 74(1), pages 127-132, December.
    10. David R. Collie, 2006. "Tariffs And Subsidies Under Asymmetric Oligopoly: Ad Valorem Versus Specific Instruments," Manchester School, University of Manchester, vol. 74(3), pages 314-333, 06.
    11. Nirvikar Singh & Xavier Vives, 1984. "Price and Quantity Competition in a Differentiated Duopoly," RAND Journal of Economics, The RAND Corporation, vol. 15(4), pages 546-554, Winter.
    Full references (including those not matched with items on IDEAS)

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    When requesting a correction, please mention this item's handle: RePEc:otg:wpaper:0711. 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: (Janet Bryant)

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.