Endogenous Market Structure, Trade Cost Reduction, and Welfare

Marjit, Sugata; Mukherjee, Arijit

Abstract

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.

Citation

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
• DOI: https://doi.org/10.1628/093245615x14322754804672
• Public URL: https://nottingham-repository.worktribe.com/output/1394420
• Publisher URL: https://www.ingentaconnect.com/content/mohr/jite/2015/00000171/00000003/art00006