International Trade with Increasing Returns in the Transportation Sector

Haiwen Zhou

MPRA Paper from University Library of Munich, Germany

Abstract: In this general equilibrium framework, the transportation sector is modeled as a distinct sector with increasing returns. A more advanced technology has a higher fixed cost but a lower marginal cost of production. Even with both manufacturing firms and transportation firms engage in oligopolistic competition and choose technologies optimally, the model is tractable and results are derived analytically. Technology adoptions in the manufacturing sector and in the transportation sector are reinforcing and multiple equilibria may exist. Firms choose more advanced technologies and the prices decrease when the size of the population is larger.

Keywords: Transportation costs; international trade; the choice of technology; increasing returns; strategic complementarity (search for similar items in EconPapers)
JEL-codes: F10 O14 R40 (search for similar items in EconPapers)
Date: 2017-10-13
New Economics Papers: this item is included in nep-cta, nep-int and nep-tre
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Published in Frontiers of Economics in China 4.9(2014): pp. 606-633

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Journal Article: International Trade with Increasing Returns in the Transportation Sector (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:81943

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