Oligopoly in Segmented Markets

43 Pages Posted: 19 Jun 2004  

Shmuel Ben-Zvi

Independent

Elhanan Helpman

Harvard University - Department of Economics; National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR)

Date Written: July 1988

Abstract

We propose a new solution concept for a game among oligopolists that simultaneously compete in several segmented markets. The motivation for this solution comes from international trade, but it also has applications in other areas. It is based on a three-stage extension of the two-stage Kreps-Scheinkman game. We show that two-way trade is not an equilibrium outcome and that there exist bounds on possible cross-market priced differentials that are defined by transport costs. Prices are the same when transport costs are zero. In fact, in the limiting case of zero transport costs the equilibrium coincides with a Cournot equilibrium in a single integrated market. In the presence of transport coats there nay exist multiple equilibria.

Suggested Citation

Ben-Zvi, Shmuel and Helpman, Elhanan, Oligopoly in Segmented Markets (July 1988). NBER Working Paper No. w2665. Available at SSRN: https://ssrn.com/abstract=439588

Shmuel Ben-Zvi

Independent

No Address Available

Elhanan Helpman (Contact Author)

Harvard University - Department of Economics ( email )

Littauer Center
Cambridge, MA 02138
United States
617-495-4690 (Phone)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Centre for Economic Policy Research (CEPR)

77 Bastwick Street
London, EC1V 3PZ
United Kingdom

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