Product Differentiation, the Volume of Trade and Profits under Cournot and Bertrand Duopoly

Abstract

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Effect of Trade Liberalization on Asymmetric Countries for Homogenous and Differentiate Product: Case of Pakistan-China Free Trade Agreement

“…In the previous literature (Ashournia et al 2013;Bernhofen 2001;Brander 1981;Brander and Krugman 1983;Chang and Xiao 2015;Clarke and Collie 2003;Collie 1996;Collie and Le 2014;Cordella 1993;Friberg and Ganslandt 2005;Fujiwara 2009; Kawabata and Takarada 2015; Kawabata et al 2010;Kiyotaki and Miyakawa 2013;Krzysztof 2016;Saggi 2006;Yamamoto 2014;Yang and Kyung 2014), it can be observed that when exploring the effect of trade liberalization on welfare, there is a gap for the case of Bertrand competition under asymmetric country. There could be very few studies that follow these conditions; however, there is no single study that analyses the effect of trade liberalization on all three countries under Bertrand competition for the asymmetric countries.…”

“…While the autarky equilibrium can be adequately competitive. While considering the Bertrand competition most of the studies hold the assumption of symmetric countries size (Ashournia et al 2013;Collie and Le 2014;Kawabata and Takarada 2015;Yang and Kyung 2014) however few of them take the assumption of asymmetric country size. For the case of symmetric country size, Kawabata and Takarada (2015) consider a model of three markets for Bertrand and Cournot competition in differentiated oligopolies and find out the impact of FTAs on the welfare of the countries.…”

“…While this result is opposite in under the Cournot competition. Similarly, Collie and Le (2014) employed the Shubik-Levitan demand functions and analyze the impact of product differentiation on the volume of trade under duopoly, their study concludes that if the cost of trade is positive then Cournot completion experienced some better positive results as compared to the Bertrand competition under trade liberalization. Also, with the same assumption of symmetric country size Ashournia et al (2013) explore "how a reduction in trade costs influences the possibility for firms to engage in international cartels, and hence how trade liberalization affects the degree of competition".…”

When the threat is stronger than the execution: trade and welfare under oligopoly

“…Bernhofen (2001) introduced product differentiation into Cournot and Bertrand oligopoly models of intra-industry trade, focusing on the effects of trade on profits and consumer surplus. The effects of trade costs in related models have also been considered by Anderson, Donsimoni, and Gabszewicz (1989), Brander and Spencer (2015) and Collie and Le (2015). Clarke and Collie (2003), and Gandslandt (2006, 2008) have explored gains from trade under Bertrand competition.…”

When the Threat is Stronger than the Execution: Trade and Welfare Under Oligopoly

“…Bernhofen (2001) introduced product differentiation into Cournot and Bertrand oligopoly models of intra-industry trade, focusing on the effects of trade on profits and consumer surplus. The effects of trade costs in related models have also been considered by Anderson, Donsimoni, and Gabszewicz (1989), Brander and Spencer (2015) and Collie and Le (2015). Clarke and Collie (2003), and Gandslandt (2006, 2008) have explored gains from trade under Bertrand competition.…”