Domestic Monopoly as a Domestic Distortion under Free Trade Conditions

Klaus Stegemann

Working Paper from Economics Department, Queen's University

Abstract: Trade theorists have recognized for thirty years that domestic monopoly may cause a domestic price distortion with a result that a country's foreign trade is not optimized under laisser-faire conditions. The alleged distortion disappears, however, when free trade exists. The distortion remains by assuming a less than perfectly elastic supply of imports or imperfect substitutability between domestic and imported products. The distortion is likely to be important during periods of underutilized capacity.

Pages: 45
Date: 1980
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Persistent link: https://EconPapers.repec.org/RePEc:qed:wpaper:379

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