Two and a Half Theories of Trade

J. Peter Neary

No 466, Economics Series Working Papers from University of Oxford, Department of Economics

Abstract: This paper discusses the place of oligopoly in international trade theory, and argues that it is unsatisfactory to ignore firms altogether, as in perfectly competitive models, or to view large firms as more productive clones of small ones, as in monopolistically competitive models. Doing either fails to account for the "granularity" in the size distribution of firms and for the dominance of large firms in exporting. The paper outlines three ways of developing more convincing models of oligopoly, which allow for free entry but do not lose sight of the grains in "granularity": heterogeneous industries, natural oligopoly, and superstar firms.

Keywords: GOLE (General Oligopolistic Equilibrium); Granularity; Heterogeneous firms; International trade and market structure (search for similar items in EconPapers)
JEL-codes: F10 F12 (search for similar items in EconPapers)
Date: 2009-12-01
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

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Working Paper: Two and a Half Theories of Trade (2009)
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