Free trade vs. autarky under asymmetric Cournot oligopoly
Abstract
The paper compares free trade with autarky in an asymmetric multi-country world with Cournot competition, constant returns and linear demand. We first derive conditions for free trade to hurt a country’s consumers, to benefit its firms, to induce it to export, to increase its output, and to raise its welfare. We further show these conditions are linked in a clear order, with each one implying the next. We then demonstrate that with different reservation prices trade can reduce world output and total consumer surplus as well as world welfare and correct oversights in earlier findings by Dong and Yuan (2010).
Citation
Amir , R , Jin , J Y & Tröge , M 2015 ' Free trade vs. autarky under asymmetric Cournot oligopoly ' School of Economics & Finance Discussion Paper , no. 1509 , University of St Andrews , St Andrews , pp. 1-20 .
Publication
ISSN
0962-4031Type
Working or discussion paper
Rights
Copyright (c)2015 the authors
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