Cournot-Nash Competition in a General Equilibrium Model of International Trade

Egbert Dierker, Hildegard Dierker and Birgit Grodal
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Hildegard Dierker: University of Vienna

No 03-28, Discussion Papers from University of Copenhagen. Department of Economics

Abstract: We use the two-factor, two-sector, two-country model of Melvin and Warne (1973) and Markusen (1981), in which the production of one good is monopolized in each country, in order to investigate the role of the price normalization. We illustrate several puzzling effects that occur if the price normalization is changed. However, we show that Markusen’s result on the direction of the trade flow between two proportional countries with constant returns to scale is robust with respect to the choice of the normalization rule. To overcome the price normalization problem in international trade we suggest to use the concept of real wealth maximization.

Keywords: international trade with imperfect competition; price normalization; real wealth maximization (search for similar items in EconPapers)
JEL-codes: D43 F11 F12 (search for similar items in EconPapers)
Pages: 21 pages
Date: 2003-05
References: View complete reference list from CitEc
Citations: View citations in EconPapers (5)

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http://www.econ.ku.dk/english/research/publications/wp/2003/0328.pdf/ (application/pdf)

Related works:
Working Paper: Cournot-Nash Competition in a General Equilibrium Model of International Trade (2003)
Working Paper: Cournot-Nash Competition in a General Equilibrium Model of International Trade (2003)
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Persistent link: https://EconPapers.repec.org/RePEc:kud:kuiedp:0328

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