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Losses From Trade In Krugman’s Model: Almost Impossible

Igor Bykadorov (), Alexey Gorn (), Sergey Kokovin and Evgeny Zhelobodko

HSE Working papers from National Research University Higher School of Economics

Abstract: Studying the standard monopolistic competition model with unspecified utility/cost functions, we find necessary and sufficient conditions on the function elasticities, when an expanding market or trade incur welfare losses. Two numerical examples explain why: either excessive or insufficient entry of firms is aggravated by market growth. The variable marginal cost enforces the harmful effect. Still harm looks practically improbable.

Keywords: Market distortions; Trade gains; Variable markups; Demand elasticity. (search for similar items in EconPapers)
JEL-codes: F12 L13 (search for similar items in EconPapers)
Pages: 12 pages
Date: 2014
New Economics Papers: this item is included in nep-bec, nep-int and nep-upt
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2) Track citations by RSS feed

Published in WP BRP Series: Economics / EC, July 2014, pages 1-12

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