Free trade vs. autarky under asymmetric Cournot oligopoly

Rabah Amir, Jim Yongtao Jin, Michael Tröge

    Research output: Working paperDiscussion paper

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    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).
    Original languageEnglish
    Place of PublicationSt Andrews
    PublisherUniversity of St Andrews
    Pages1-20
    Publication statusPublished - Oct 2015

    Publication series

    NameSchool of Economics & Finance Discussion Paper
    PublisherUniversity of St Andrews
    No.1509
    ISSN (Print)0962-4031
    ISSN (Electronic)2055-303X

    Keywords

    • Free trade
    • Cournot competition
    • Welfare loss

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