Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/223553
Authors: 
Leahy, Dermot
Neary, J. Peter
Year of Publication: 
2020
Series/Report no.: 
CESifo Working Paper No. 8481
Abstract: 
We compare trade liberalization under Cournot and Bertrand competition in reciprocal markets. In both cases, the critical level of trade costs below which the possibility of trade affects the domestic firm’s behavior is the same; trade liberalization increases trade volume monotonically; and welfare is U-shaped under reasonable conditions. However, welfare is typically greater under Bertrand competition; for higher trade costs the volume of trade is greater under Cournot competition, implying a “van-der-Rohe Region” in parameter space; and, for even higher trade costs, there exists a “Nimzowitsch Region”, where welfare is higher under Bertrand competition even though no trade takes place.
Subjects: 
Cournot and Bertrand Competition
Nimzowitsch Region
oligopoly and trade
trade liberalization
van-der-Rohe Region
JEL: 
L13
F12
Document Type: 
Working Paper

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