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Trade Bloc Formation Under Imperfect Competition

  • Conconi, P.

We examine the endogenous formation of trade blocs when markets are characterized by imperfect competition and governments use import tariffs and export subsidies to alter the strategic interactions between oligopolistic firms. Using a simple model of intra-industry trade between three ex-ante symmetric countries, we find that, while 'pure' customs unions - entailing tariff cooperation only - are stepping stones towards global free trade, 'impure' customs unions - involving the coordinated use of both tariffs and subsidies - are stumbling blocs against it.

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File URL: http://www2.warwick.ac.uk/fac/soc/economics/research/workingpapers/2008/twerp571.pdf
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Paper provided by University of Warwick, Department of Economics in its series The Warwick Economics Research Paper Series (TWERPS) with number 571.

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Length: 32 pages
Date of creation: 2000
Date of revision:
Handle: RePEc:wrk:warwec:571
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  2. Brian R. Copeland, 1990. "Strategic Interaction among Nations: Negotiable and Non-negotiable Trade Barriers," Canadian Journal of Economics, Canadian Economics Association, vol. 23(1), pages 84-108, February.
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  4. Paul Krugman, 1989. "Is Bilateralism Bad?," NBER Working Papers 2972, National Bureau of Economic Research, Inc.
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  8. Conconi, Paola & Perroni, Carlo, 2002. "Issue linkage and issue tie-in in multilateral negotiations," Journal of International Economics, Elsevier, vol. 57(2), pages 423-447, August.
  9. Venables, Anthony J, 1988. "International Capacity Choice and National Market Games," CEPR Discussion Papers 277, C.E.P.R. Discussion Papers.
  10. Kyle Bagwell & Robert W. Staiger, 1993. "Multilateral Tarriff Cooperation During the Formation of Regional Free Trade Areas," NBER Working Papers 4364, National Bureau of Economic Research, Inc.
  11. Martin Richardson, 1994. "Customs Unions and Domestic Taxes," Canadian Journal of Economics, Canadian Economics Association, vol. 27(3), pages 537-50, August.
  12. John Whalley & Colleen Hamilton, 1996. "Trading System after the Uruguay Round, The," Peterson Institute Press: All Books, Peterson Institute for International Economics, number 62, December.
  13. Carsten Kowalczyk & Tomas Sjostrom, 1993. "Bringing GATT into the Core," NBER Working Papers 4343, National Bureau of Economic Research, Inc.
  14. Gatsios, Konstantine & Karp, Larry S., 1989. "The Welfare Effects of Imperfect Harmonization of Trade and Industrial Policy," Working Papers 51256, International Agricultural Trade Research Consortium.
  15. Dixit, Avinash, 1988. "Anti-dumping and countervailing duties under oligopoly," European Economic Review, Elsevier, vol. 32(1), pages 55-68, January.
  16. Jeremy I. Bulow & John Geanakoplos & Paul D. Klemperer, 1983. "Multimarket Oligopoly," Cowles Foundation Discussion Papers 674, Cowles Foundation for Research in Economics, Yale University.
  17. Sang-Seung, Yi, 1996. "Endogenous formation of customs unions under imperfect competition: open regionalism is good," Journal of International Economics, Elsevier, vol. 41(1-2), pages 153-177, August.
  18. Barbara J. Spencer & James A. Brander, 1982. "Tariff Protection and Imperfect Competition," Working Papers 517, Queen's University, Department of Economics.
  19. Richard E. Baldwin & Paul Krugman, 1986. "Market Access and International Competition: A Simulation Study of 16K Random Access Memories," NBER Working Papers 1936, National Bureau of Economic Research, Inc.
  20. Richardson, Martin, 1999. "Trade and Competition Policies: Concordia Discors?," Oxford Economic Papers, Oxford University Press, vol. 51(4), pages 649-64, October.
  21. Gatsios, Konstantine & Karp, Larry, 1995. "Delegation in a general equilibrium model of customs unions," European Economic Review, Elsevier, vol. 39(2), pages 319-333, February.
  22. Horstmann, Ignatius J. & Markusen, James R., 1986. "Up the average cost curve: Inefficient entry and the new protectionism," Journal of International Economics, Elsevier, vol. 20(3-4), pages 225-247, May.
  23. Collie, David, 1993. "Profit-Shifting Export Subsidies and the Sustainability of Free Trade," Scottish Journal of Political Economy, Scottish Economic Society, vol. 40(4), pages 408-19, November.
  24. Collie, David R, 1997. "Bilateralism Is Good: Trade Blocs and Strategic Export Subsidies," Oxford Economic Papers, Oxford University Press, vol. 49(4), pages 504-20, October.
  25. John Kennan & Raymond Riezman, 1990. "Optimal Tariff Equilibria with Customs Unions," Canadian Journal of Economics, Canadian Economics Association, vol. 23(1), pages 70-83, February.
  26. Ray, D. & Vohra, R., 1993. "Equilibrium Binding Agreements," Papers 21, Boston University - Department of Economics.
  27. Bernheim, B. Douglas & Peleg, Bezalel & Whinston, Michael D., 1987. "Coalition-Proof Nash Equilibria I. Concepts," Journal of Economic Theory, Elsevier, vol. 42(1), pages 1-12, June.
  28. Dixit, Avinash, 1984. "International Trade Policy for Oligopolistic Industries," Economic Journal, Royal Economic Society, vol. 94(376a), pages 1-16, Supplemen.
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