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Endogenous Market Structure, Trade Cost Reduction, and Welfare

Marjit, Sugata; Mukherjee, Arijit

Authors

Sugata Marjit



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.

Journal Article Type Article
Publication Date Sep 1, 2015
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
APA6 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
DOI https://doi.org/10.1628/093245615x14322754804672
Publisher URL https://www.ingentaconnect.com/content/mohr/jite/2015/00000171/00000003/art00006
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