Trade Patterns and Export Pricing Under Non-CES Preferences

Sergey Kichko, Sergey Kokovin and Evgeny Zhelobodko

No 124, FIW Working Paper series from FIW

Abstract: We develop a two-factor, two-sector trade model of monopolistic competition with variable elasticity of substitution. Firm profit and firm size may increase or decrease with market integration depending on the degree of asymmetry between countries. The country in which capital is relatively abundant is a net exporter of the manufactured good, while both firms' size and profits are lower in this country than in the country where capital is relatively scarce. By contrast, the pricing policy adopted by firms does not depend on capital endowment and country asymmetry. It is determined by the nature of preferences: when demand elasticity increases (decreases) with consumption, firms practice dumping (reverse-dumping).

Keywords: two-factor trade model; monopolistic competition; capital asymmetry; variable markups (search for similar items in EconPapers)
JEL-codes: F12 F13 L13 (search for similar items in EconPapers)
Pages: 48
Date: 2013-06
New Economics Papers: this item is included in nep-int
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Citations: View citations in EconPapers (2)

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Related works:
Journal Article: Trade patterns and export pricing under non-CES preferences (2014)
Working Paper: Trade Patterns And Export Pricing Under Non-Ces Preferences (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:wsr:wpaper:y:2013:i:124

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