Trading Blocs and Market Performance under Duopolistic Competition

R Scott Hacker and Qaizar Hussain ()
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Qaizar Hussain: International Monetary Fund, Postal: 700 19th Street, N.W., Washington D.C. 20431,, U.S.A

Journal of Economic Integration, 2005, vol. 20, 294-317

Abstract:

This paper uses a three-country duopoly model to examine the effects of lowered trade barriers when a new entrant joins a trading bloc. There are two firms - a small-country firm and a large-country firm within the bloc - and three markets -two within and one (new entrant) outside the bloc. The results from trade bloc expansion vary for when marginal cost is falling with respect to output, but are clear when marginal cost is rising. In the latter case, profits improve more for the small-country firm than for the large-country firm. Consequences on prices, production, and trade are also considered.

Keywords: Trading Blocs; Trade Barriers; Trade Expansion; Duopoly; Oligopoly; Tariffs (search for similar items in EconPapers)
JEL-codes: D43 D60 F10 F15 (search for similar items in EconPapers)
Date: 2005
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Persistent link: https://EconPapers.repec.org/RePEc:ris:integr:0316

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