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Trade patterns and export pricing under non-CES preferences

Sergey Kichko, Sergey Kokovin and Evgeny Zhelobodko

Journal of International Economics, 2014, vol. 94, issue 1, 129-142

Abstract: We develop a two-factor, two-sector trade model of monopolistic competition with variable elasticity of substitution. Firms' profits and sizes 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, although both firm sizes and profits are lower in this country than in the country where capital is relatively scarce. The pricing policy adopted by firms depends neither on capital endowment nor 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; Variable markups (search for similar items in EconPapers)
JEL-codes: F12 F13 (search for similar items in EconPapers)
Date: 2014
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Related works:
Working Paper: Trade Patterns And Export Pricing Under Non-Ces Preferences (2014) Downloads
Working Paper: Trade Patterns and Export Pricing Under Non-CES Preferences (2013) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:eee:inecon:v:94:y:2014:i:1:p:129-142

DOI: 10.1016/j.jinteco.2014.06.004

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