IDEAS home Printed from https://ideas.repec.org/a/ecj/econjl/v102y1992i412p578-87.html
   My bibliography  Save this article

Sunk Costs and Trade Liberalisation

Author

Listed:
  • Motta, Massimo

Abstract

A model of vertical product differentiation is applied to the study of trade between two countries of differing sizes. Firms in the small country choose lower-quality products in autarky. Unlike A. Shaked and J. Sutton (1984), welfare effects of trade are fully analyzed and shown to depend on the degree of sunkness of costs. If firms have not sunk costs, losses from trade may arise for the small country in the short run (when quality is fixed) and for the large country in the long run (when quality is variable). If costs are sunk, both countries always gain from trade. Copyright 1992 by Royal Economic Society.

Suggested Citation

  • Motta, Massimo, 1992. "Sunk Costs and Trade Liberalisation," Economic Journal, Royal Economic Society, vol. 102(412), pages 578-587, May.
    • Handle: RePEc:ecj:econjl:v:102:y:1992:i:412:p:578-87
    as

    Download full text from publisher

    File URL: http://links.jstor.org/sici?sici=0013-0133%28199205%29102%3A412%3C578%3ASCATL%3E2.0.CO%3B2-K&origin=bc
    File Function: full text
    Download Restriction: Access to full text is restricted to JSTOR subscribers. See http://www.jstor.org for details.
    ---><---

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Amal Hili & Rim Lahmandi-Ayed & Hejer Lasram, 2016. "Differentiation, labor market and globalization," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 25(6), pages 809-833, September.
    2. L. Lambertini & G. Rossini, 1996. "Vertical Differentiaiton, Trade and Endogenous Common Standards," Working Papers 263, Dipartimento Scienze Economiche, Universita' di Bologna.
    3. Alberto Salvo, 2010. "Sequential Cross‐border Mergers in Models of Oligopoly," Economica, London School of Economics and Political Science, vol. 77(306), pages 352-383, April.
    4. Sakshi Aggarwal & Debashis Chakraborty, 2021. "Which Factors influence Vertical Intra-Industry Trade in India? Empirical Results from Panel Data Analysis," Working Papers 2154, Indian Institute of Foreign Trade.
    5. Antonio Cabrales & Massimo Motta, 1996. "Country asymmetries, endogenous product choice and the speed of trade liberalization," Economics Working Papers 259, Department of Economics and Business, Universitat Pompeu Fabra, revised Jan 1998.
    6. Stefan Lutz & Mina Baliamoune-Lutz, 2003. "Mutual Recognition of National Minimum Quality Standards may Support International Convergence," Journal of Industry, Competition and Trade, Springer, vol. 3(4), pages 293-311, December.
    7. Tharakan, Joe & Thisse, Jacques-Francois, 2002. "The importance of being small. Or when countries are areas and not points," Regional Science and Urban Economics, Elsevier, vol. 32(3), pages 381-408, May.
    8. José Blanes & Carmela Martín, 2000. "The nature and causes of intra-industry trade: Back to the comparative advantage explanation? The case of Spain," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 136(3), pages 423-441, September.
    9. Andaluz, Joaquin, 2000. "On protection and vertical product differentiation," Regional Science and Urban Economics, Elsevier, vol. 30(1), pages 77-97, January.
    10. Fertő, Imre, 2006. "Vertikálisan és horizontálisan differenciált, ágazaton belüli kereskedelem az Európai Unió tejpiacán [Trade within vertically and horizontally differentiated industries on the milk market of the Eu," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(6), pages 526-539.
    11. Tharakan, J., 2001. "Revisiting “On nations’ size and transportation costs”," LIDAM Discussion Papers CORE 2001032, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    12. L. Lambertini, 2002. "the Specialization of Production and Labour Mobility Under Endogenous Differentiation," Working Papers 453, Dipartimento Scienze Economiche, Universita' di Bologna.
    13. Imre Ferto & Lionel J. Hubbard, 2002. "Intra-industry trade in horizontally and vertically differentiated agrifood products between Hungary and the EU," CERS-IE WORKING PAPERS 0202, Institute of Economics, Centre for Economic and Regional Studies.
    14. Cabrales, Antonio & Motta, Massimo, 2001. "Country asymmetries, endogenous product choice and the timing of trade liberalization," European Economic Review, Elsevier, vol. 45(1), pages 87-107, January.
    15. Alberto Salvo, 2004. "A General Analysis of Sequential Merger Games with an Application to Cross-Border Mergers," STICERD - Economics of Industry Papers 36, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE.
    16. Ngo Van Long & Zhuang Miao, 2020. "Multiple‐quality Cournot oligopoly and the role of market size," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 29(4), pages 932-952, October.
    17. Jofre-Bonet, Mireia, 2000. "Health care: private and/or public provision," European Journal of Political Economy, Elsevier, vol. 16(3), pages 469-489, September.
    18. BACCHIEGA, Emanuele, 2004. "Vertical differentiation, wage bargaining and intra-industry trade liberalization," LIDAM Discussion Papers CORE 2004028, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    19. Fertő, Imre & Hubbard, Lionel J., 2003. "A vertikálisan és horizontálisan differenciált mezőgazdasági termékek ágazaton belüli kereskedelme Magyarország és az Európai Unió Között [Intra-industry trade in vertically and horizontally differ," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(2), pages 152-163.
    20. Alessandro Turrini, 2000. "High-quality bias in vertically differentiated oligopolies—a note on skills, trade, and welfare," Journal of Economics, Springer, vol. 71(2), pages 133-147, June.
    21. José J. Sempere Monerris & Rafael Moner Colonques & Amparo Urbano Salvador, 2010. "Trade liberalization in vertically related markets," Working Papers. Serie AD 2010-09, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
    22. Constantatos, Christos & Perrakis, Stylianos, 1995. "Différenciation verticale et structure du marché," L'Actualité Economique, Société Canadienne de Science Economique, vol. 71(1), pages 71-98, mars.
    23. Olivier Gaussens & Sophie Lecostey, 1994. "Politique technologique et intégration mondiale," Revue Économique, Programme National Persée, vol. 45(3), pages 459-474.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ecj:econjl:v:102:y:1992:i:412:p:578-87. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley-Blackwell Digital Licensing or Christopher F. Baum (email available below). General contact details of provider: https://edirc.repec.org/data/resssea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.