Endogenous Market Structure, Trade Cost Reduction, and Welfare

Sugata Marjit and Arijit Mukherjee

Journal of Institutional and Theoretical Economics (JITE), 2015, vol. 171, issue 3, 493-511

Abstract: We show the long-run effects of a trade cost reduction in an oligopolistic industry. If the labor markets are competitive and the products are homogeneous, a lower transportation cost affects neither consumer surplus nor welfare of the importing country under free entry of domestic firms. If the products are imperfect substitutes, a lower transportation cost may reduce consumer surplus and welfare of the importing country. We also show the implications of a domestic labor union, free entry of domestic and foreign firms, integer constraint, and a tariff as the trade cost.

JEL-codes: F12 L13 L40 (search for similar items in EconPapers)
Date: 2015
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Citations: View citations in EconPapers (10)

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DOI: 10.1628/093245613X14322754804672

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