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The Closed‐Loop Effects Of Market Integration In A Dynamic Duopoly

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  • KENJI FUJIWARA
  • TSUYOSHI SHINOZAKI

Abstract

This paper develops a dynamic game model of reciprocal dumping to reconsider welfare effects of market integration, i.e. reductions in transport costs. We show that welfare under trade is unambiguously less than welfare under autarky for any level of transport costs, which is impossible in static models where trade is profitable if the transport cost is low enough. This is because the negative effect through closed‐loop property of feedback strategies dominates the positive effects.

Suggested Citation

  • Kenji Fujiwara & Tsuyoshi Shinozaki, 2010. "The Closed‐Loop Effects Of Market Integration In A Dynamic Duopoly," Australian Economic Papers, Wiley Blackwell, vol. 49(1), pages 1-12, March.
    • Handle: RePEc:bla:ausecp:v:49:y:2010:i:1:p:1-12
    DOI: 10.1111/j.1467-8454.2010.00383.x
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    References listed on IDEAS

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    Cited by:

    1. Benchekroun, Hassan & Ray Chaudhuri, Amrita & Tasneem, Dina, 2020. "On the impact of trade in a common property renewable resource oligopoly," Journal of Environmental Economics and Management, Elsevier, vol. 101(C).

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