Modes of Imperfect Competition in Structural Gravity Models

Anton Hartl ()
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Anton Hartl: Austrian Federal Competition Authority (BWB)

Journal of Industry, Competition and Trade, 2025, vol. 25, issue 1, No 19, 22 pages

Abstract: Abstract This paper examines implications of modes of imperfect competition in structural gravity models. To this end, I employ a parsimonious quantitative general equilibrium model of world trade where, contrary to CES demand models with perfect or monopolistic competition, firm-specific markups vary across destinations. Firms act strategically by choosing optimal quantities or prices depending on their market power. I review the recent literature on the competition-induced endogeneity of gravity estimates and use the model to check the success of bias corrections suggested by Breinlich et al. (2024) and Heid and Stähler (Econ Model 131:106604 2024) in Monte Carlo simulations. Further, I examine welfare effects of trade (de)liberalization under oligopoly. I find that when firms behave oligopolistic, trade liberalization leads to higher welfare gains.

Keywords: Structural gravity model; Imperfect competition; Gains from trade (search for similar items in EconPapers)
JEL-codes: F12 L13 (search for similar items in EconPapers)
Date: 2025
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DOI: 10.1007/s10842-025-00453-w

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