On the Persistence of Leadership or Leapfrogging in International Trade

Antonio Cabrales, Massimo Motta () and Jacques Thisse

No 1106, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: When two countries, starting from different quality levels reflecting different conditions of domestic market demand, open to trade, two possible equilibria arise. In the first, the quality leader maintains its position. In the second, leapfrogging occurs. The latter is possible only if the initial quality gap is not too wide, however. Further, when the risk dominance criterion is used, only the former equilibrium is selected. This result holds for both segmented and integrated markets. Qualities, profits and world welfare are higher when firms can price discriminate (i.e. under segmented markets).

Keywords: Country Asymmetries Integrated Markets; Equilibrium Selection; International Trade; Product Differentiation; Segmented Markets (search for similar items in EconPapers)
JEL-codes: F12 F15 L13 (search for similar items in EconPapers)
Date: 1995-01
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Citations: View citations in EconPapers (7)

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Related works:
Journal Article: On the Persistence of Leadership or Leapfrogging in International Trade (1997)
Working Paper: On the persistence of leadership or leapfrogging in international trade (1997)
Working Paper: On the Persistence of Leadership or Leapfrogging in International Trade (1996)
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