Trade Patterns and Export Pricing Under Non-CES Preferences

45 Pages Posted: 4 Apr 2014

See all articles by Sergey Kichko

Sergey Kichko

National Research University Higher School of Economics

Sergey Kokovin

National Research University Higher School of Economics

Evgeny Zhelobodko

In memoriam

Date Written: April 2, 2014

Abstract

We develop a two-factor, two-sector trade model of monopolistic competition with variable elasticity of substitution. Firms' profits and sizes may increase or decrease with market integration depending on the degree of asymmetry between countries. The country in which capital is relatively abundant is a net exporter of the manufactured good, although both firm sizes and profits are lower in this country than in the country where capital is relatively scarce. The pricing policy adopted by firms neither depends on capital endowment nor country asymmetry. It is determined by the nature of preferences: when demand elasticity increases (decreases) with consumption, firms practice dumping (reverse-dumping).

Keywords: international trade, monopolistic competition, capital asymmetry, variable markups

JEL Classification: F12, F13

Suggested Citation

Kichko, Sergey and Kokovin, Sergey and Zhelobodko, Evgeny, Trade Patterns and Export Pricing Under Non-CES Preferences (April 2, 2014). Higher School of Economics Research Paper No. WP BRP 54/EC/2014, Available at SSRN: https://ssrn.com/abstract=2419940 or http://dx.doi.org/10.2139/ssrn.2419940

Sergey Kichko (Contact Author)

National Research University Higher School of Economics ( email )

Myasnitskaya street, 20
Moscow, Moscow 119017
Russia

Sergey Kokovin

National Research University Higher School of Economics ( email )

Myasnitskaya street, 20
Moscow, Moscow 119017
Russia

Evgeny Zhelobodko

In memoriam

No Address Available

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