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Spatial discrimination, nations' size and transportation costs

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  • Kai Andree

Abstract

In this paper we develop a spatial Cournot trade model with two unequally sized countries, using the geographical interpretation of the Hotelling line. We analyze the trade and welfare effects of international trade between these two countries. The welfare analysis indicates that in this framework the large country benefits from free trade and the small country may be hurt by opening to trade. This finding is contrary to the results of Shachmurove and Spiegel (1995) as well as Tharakan and Thisse (2002), who use related models to analyze size effects in international trade, where the small country usually gains from trade and the large country may lose.

Suggested Citation

  • Kai Andree, 2010. "Spatial discrimination, nations' size and transportation costs," Volkswirtschaftliche Diskussionsbeiträge 101, Universität Potsdam, Wirtschafts- und Sozialwissenschaftliche Fakultät.
  • Handle: RePEc:pot:vwldis:101
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    1. James W. Friedman, 1971. "A Non-cooperative Equilibrium for Supergames," Review of Economic Studies, Oxford University Press, vol. 38(1), pages 1-12.
    2. Stefano Colombo, 2012. "Collusion in two models of spatial competition with quantity-setting firms," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 48(1), pages 45-69, February.
    3. John Gross & William L. Holahan, 2003. "Credible Collusion in Spatially Separated Markets," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 44(1), pages 299-312, February.
    4. Alessandra Chirco & Marcella Scrimitore & Corrado Benassi, 2007. "Spatial Discrimination with Quantity Competition and High Transportation Costs: a Note," Economics Bulletin, AccessEcon, vol. 12(1), pages 1-7.
    5. Kai Andree & Juljana Calaki, 2011. "Product differentiation in a spatial Cournot model with asymmetric demand," Economics Bulletin, AccessEcon, vol. 31(2), pages 1125-1130.
    6. Jehiel, Philippe, 1992. "Product differentiation and price collusion," International Journal of Industrial Organization, Elsevier, vol. 10(4), pages 633-641, December.
    7. Chang, Myong-Hun, 1991. "The effects of product differentiation on collusive pricing," International Journal of Industrial Organization, Elsevier, vol. 9(3), pages 453-469, September.
    8. Chang, Myong-Hun, 1992. "Intertemporal Product Choice and Its Effects on Collusive Firm Behavior," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 33(4), pages 773-793, November.
    9. Hackner, Jonas, 1995. "Endogenous product design in an infinitely repeated game," International Journal of Industrial Organization, Elsevier, vol. 13(2), pages 277-299.
    10. repec:ebl:ecbull:v:12:y:2007:i:1:p:1-7 is not listed on IDEAS
    11. José María Chamorro Rivas, 2000. "Spatial dispersion in cournot competition," Spanish Economic Review, Springer;Spanish Economic Association, vol. 2(2), pages 145-152.
    12. Marcella Scrimitore, 2011. "Spatial Discrimination, Product Substitutability And Welfare," Bulletin of Economic Research, Wiley Blackwell, vol. 63(3), pages 231-242, July.
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