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Endogenous Market Structure, Trade Cost Reduction, and Welfare

Marjit, Sugata; Mukherjee, Arijit


Sugata Marjit

Professor of Industrial Economics


We show the long-run effects of a trade cost reduction in an oligopolistic industry. If the labor markets are competitive and the products are homogeneous, a lower transportation cost affects neither consumer surplus nor welfare of the importing country under free entry of domestic firms. If the products are imperfect substitutes, a lower transportation cost may reduce consumer surplus and welfare of the importing country. We also show the implications of a domestic labor union, free entry of domestic and foreign firms, integer constraint, and a tariff as the trade cost.


Marjit, S., & Mukherjee, A. (2015). Endogenous Market Structure, Trade Cost Reduction, and Welfare. Journal of Institutional and Theoretical Economics, 171(3), 493-511. doi:10.1628/093245615x14322754804672

Journal Article Type Article
Acceptance Date Feb 8, 2015
Publication Date Sep 1, 2015
Deposit Date Dec 9, 2018
Journal Journal of Institutional and Theoretical Economics JITE
Print ISSN 0932-4569
Publisher Mohr Siebeck
Peer Reviewed Peer Reviewed
Volume 171
Issue 3
Pages 493-511
Public URL
Publisher URL