Spatial Discrimination, Nations' Size and Transportation Costs

Kai Andree ()

International Economic Journal, 2013, vol. 27, issue 3, 385-397

Abstract: In this paper we develop a spatial Cournot trade model with two unequally sized countries, using the geographical interpretation of the Hotelling line. We analyse the trade and welfare effects of international trade between these two countries. The welfare analysis indicates that in this framework the large country benefits from free trade and the small country may be hurt by opening to trade. This finding is contrary to the results of Shachmurove & Spiegel (1995) as well as Tharakan & Thisse (2002), who use similar models to analyze size effects in international trade, where the small country usually gains from trade and the large country may lose.

Date: 2013
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Working Paper: Spatial discrimination, nations' size and transportation costs (2010)
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DOI: 10.1080/10168737.2012.660181

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