Trade and Imperfect Competition in General Equilibrium
41 Pages Posted: 24 Aug 2011
Date Written: August 24, 2011
This paper employs a general equilibrium model of imperfect competition and trade in which capital is used to establish firms and labor is used for production. We show that two different types of equilibria may exist, one with factor price equalization and one with different factor prices. When factor prices are equalized, trade improves welfare under relatively mild conditions. However, if factor prices differ, these conditions are not sufficient for mutual gains from trade.
Keywords: imperfect competition, international trade, general equilibrium
JEL Classification: F120, D500
Suggested Citation: Suggested Citation