Losses From Trade In Krugman’s Model: Almost Impossible
Igor Bykadorov (),
Alexey Gorn (),
Sergey Kokovin and
HSE Working papers from National Research University Higher School of Economics
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
New Economics Papers: this item is included in nep-bec, nep-int and nep-upt
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Published in WP BRP Series: Economics / EC, July 2014, pages 1-12
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Persistent link: https://EconPapers.repec.org/RePEc:hig:wpaper:61/ec/2014
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