【文章內(nèi)容簡介】 untries export and import ? products of the same products category as in the ? Krugman model ? . the . exports and imports cars ? constitutes about 188。 of the world trade Introducing Trade to the Monopolistic Competition Model ? Suppose the costs of a firm take the form C = F + c x Q (1) ? The fixed cost gives rise to economies of scale, because the larger the firm?s output, the less is fixed cost per unit ? The firm?s average cost (total cost divided by output) is AC = C/Q = F/Q + c (2) ? The firm?s marginal cost (amount it costs the firm to produce one extra unit) is c ?where: –Q is the firm?s sales –S is the total sales of the industry –n is the number of firms in the industry –b is a constant term representing the responsiveness of a firm?s sales to its price –P is the price charged by the firm itself –A particular equation for the demand facing a firm that has these properties is: Q = S x [1/n – b x (P – P)] (3) –P is the average price charged by its petitors ?Assume all firms in this industry are symmetric, . identical demand and cost functions for all firms ?The method for determining the number of firms and the average price charged involves three steps: ?To derive a relationship between the number of firms and the average cost of a typical firm (CC curve) ?To derive a relationship between the number of firms and the price each firm charges (PP curve) ?To derive the equilibrium number of firms and the average price that firms charge (intersection between CC and PP) Market Equilibrium – How do the average costs depend on the number of firms in the industry? – Under symmetry, P = P, equation (3) tells us that Q = S/n but equation (2) shows us that the average cost depends inversely on a firm’s output – We conclude that average cost depends on the size of the market and the number of firms in the industry: AC = F/Q + c = n x F/S + c (4) – The more firms there are in the industry the higher is the average cost as shown by the CC curve in Figure 3 below ?The number of firms and the price ?The price the typical firm charges depends on the number of firms in the industry ?The more firms, the more petition, and hence the lower the price ?In the monopolistic petition model firms are assumed to take each others? prices as given The Theory of Imperfect Competition – If each firm treats P as given, we can rewrite the demand curve (5) in the form: Q = (S/n + S x b x P) – S x b x P (5) ?Profitmaximizing firms set marginal revenue equal to their marginal cost, c ?This generates a negative relationship between the price and the number of firms in the market which is the PP curve: P = c + 1/(b x n) (6) ?The more firms there are in the industry, the lower the price each firm will charge The Theory of Imperfect Competition AC = F/Q + c = n x F/S + c Numerical Example: ? Cars produced by a monopolistically petitive industry ? b = 1/30,000 ? F = $750,000,000 ? c = $5000 ? Two countries (Home and Foreign) with the same costs of automobile production ? Annual sales of automobiles are 900,000 at Home and million at Foreign Monopolistic Competition and Trade )](1[ ppbnSQ ??? Explaining Trade Patterns ?? Interindustry trade reflects the parative ?advantage ? the pattern of trade is determined by relative factor endowments / technological differences ?? Intraindustry trade reflects economies of scale ?the pattern of trade is unpredictable ?The relative importance of the two kinds of trade ?depend on how similar the countries are Other Explanations of IntraIndustry Trade ?? Transport costs in large countries ?(. a buyer in Maine buys the Canadian rather than the Californian product) ?? Dynamic economies of scale: ?product differentiation + learningbydoing ?? Problems with statistics ?Aggregation: the categories are too wide (. “beverages and tobacco”) ? Different quality of goods inside a product category Domestic monopolies ? Domestic monopoly entering world markets ?? Single monopoly amp。 price discrimination ?? Two domestic monopolies entering world markets (reciprocal dumping model) Domestic Monopoly Entering World Markets Single world supplier:Price Discrimination Dumping ? One of the most heated amp。 active debates on trade concerns “dumping”. ? Roughly, this means that domestic producers plain that foreign ? petitors are selling at unfairly low prices and hence there should be “antidumping measures” (tariffs/quotas). There are (at least) two definitions what “dumping” means: ? Economics definition: Price discrimination in the context of international trade (a firm is charging lower/higher price for its exports) ? “Pragmatic” (lawyers?) definition: the price is less than ? production cost. This could be an indicator of predatory pricing ? where the aim is to drive the domestic petitor out of the market and afterwards the foreign firm would use its monopoly power and increase prices (and hence hurt the consumers). Reciprocal Dumping Model ? Two countries, two firms producing identical ? goods, transportation costs ? ? First, both are domestic monopolies ? ? Then, both enter each others markets ? → duopoly (two firms taking into account the behaviour of each ? other when choosing prices and quantities) ? → In the (Nash) equilibrium price and output are