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Spatial discrimination, nations' size and transportation costs

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  • Kai Andree

Abstract

In this paper we develop a spatial Cournot trade model with two unequally sized countries, using the geographical interpretation of the Hotelling line. We analyze the trade and welfare effects of international trade between these two countries. The welfare analysis indicates that in this framework the large country benefits from free trade and the small country may be hurt by opening to trade. This finding is contrary to the results of Shachmurove and Spiegel (1995) as well as Tharakan and Thisse (2002), who use related models to analyze size effects in international trade, where the small country usually gains from trade and the large country may lose.

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  • Kai Andree, 2010. "Spatial discrimination, nations' size and transportation costs," Volkswirtschaftliche Diskussionsbeiträge 101, Universität Potsdam, Wirtschafts- und Sozialwissenschaftliche Fakultät.
    • Handle: RePEc:pot:vwldis:101
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    File URL: http://nbn-resolving.de/urn:nbn:de:kobv:517-opus-48117
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    Cited by:

    1. Ziying Yang & Félix Muñoz-García, 2018. "Can Banning Spatial Price Discrimination Improve Social Welfare?," Journal of Industry, Competition and Trade, Springer, vol. 18(2), pages 223-243, June.

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