Chapter 13 A Two-Country Model of International Trade with Increasing Returns and Oligopoly

Abstract

Purpose – This chapter aims to examine trade patterns and gains from trade in a two-country general equilibrium model of increasing returns and oligopoly.

Approach – A general equilibrium model of increasing returns and oligopoly.

Findings – The determination of patterns of specialization and trade and gains from trade highly depends on the interaction between the degree of increasing returns and market power as well as the cross-country difference in factor endowments.

Originality – Unlike the existing literature, we endogenize the determination of specialization by using an allocation curve approach by Ethier (1982). To our knowledge, there is no comparable study that incorporates Ethier's (1982) approach to oligopolistic models of international trade.

Citation

Fujiwara, K., Suga, N. and Tawada, M. (2008), "Chapter 13 A Two-Country Model of International Trade with Increasing Returns and Oligopoly", Tran-Nam, B., Van Long, N. and Tawada, M. (Ed.) Globalization and Emerging Issues in Trade Theory and Policy (Frontiers of Economics and Globalization, Vol. 5), Emerald Group Publishing Limited, Leeds, pp. 209-229. https://doi.org/10.1016/S1574-8715(08)05013-6