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Comparative Advantage Under Monopoly: A Note On the Role of Market Power

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  • E. Bacchiega

Abstract

We argue that it is the number of agents holding market power, rather than the presence of market power itself, that may force Ricardian economies into autarchy. We apply the concepts of monopoly equilibrium by Baldwin (1948) to the model of Cordella and Gabszewicz (1997) to show that, differently from the oligopoly case, trade always arises at a monopoly equilibrium whereas autarchy is never an outcome. As a consequence, monopoly Pareto-dominates oligopoly.

Suggested Citation

  • E. Bacchiega, 2011. "Comparative Advantage Under Monopoly: A Note On the Role of Market Power," Working Papers wp724, Dipartimento Scienze Economiche, Universita' di Bologna.
    • Handle: RePEc:bol:bodewp:wp724
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    1. Cordella, Tito & J. Gabszewicz, Jean, 1997. "Comparative advantage under oligopoly," Journal of International Economics, Elsevier, vol. 43(3-4), pages 333-346, November.
    2. Robert E. Baldwin, 1948. "Equilibrium in International Trade: A Diagrammatic Analysis," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 62(5), pages 748-762.
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    More about this item

    JEL classification:

    • F10 - International Economics - - Trade - - - General
    • D42 - Microeconomics - - Market Structure, Pricing, and Design - - - Monopoly

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