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Theory and Policy of Trade with Imperfect Competition

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Imperfect competition in international trade

Abstract

Most of the traditional theories of trade have been developed on the assumptions of perfect competition and constant returns to scale. Typical examples are the Ricardian and Heckscher–Ohlin models of trade. In the Ricardian model, trade is due to technological differences between countries. In the Heckscher–Ohlin model, technologies are assumed identical between countries, and trade is due to differences in relative factor endowments. Both models succeed in explaining the determinants of interindustry trade. However, they are not capable of explaining the phenomenon of intra-industry trade, which is a major component of world trade. This is chiefly due to the two traditional key assumptions of perfect competition and constant returns to scale.

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Authors
  1. Winston W. Chang
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  2. Seiichi Katayama
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Editors and Affiliations

  1. Department of Economics, State University of New York at Buffalo, Buffalo, New York, USA

    Winston W. Chang

  2. Research Institute for Economics and Business Administration, Kobe University, Japan

    Seiichi Katayama

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Chang, W.W., Katayama, S. (1995). Theory and Policy of Trade with Imperfect Competition. In: Chang, W.W., Katayama, S. (eds) Imperfect competition in international trade. Springer, Boston, MA. https://doi.org/10.1007/978-1-4615-2249-2_2

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  • DOI: https://doi.org/10.1007/978-1-4615-2249-2_2

  • Publisher Name: Springer, Boston, MA

  • Print ISBN: 978-1-4613-5947-0

  • Online ISBN: 978-1-4615-2249-2

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