Competition for firms in an oligopolistic industry: the impact of economic integration

A. Haufler, I. Wooton

Research output: Contribution to journalArticle

38 Citations (Scopus)
126 Downloads (Pure)

Abstract

We set up a model of generalised oligopoly where two countries of different size compete for an exogenous, but variable, number of identical firms. The model combines a desire by national governments to attract internationally mobile firms with the existence of location rents that arise even in a symmetric equilibrium where firms are dispersed. As economic integration proceeds, equilibrium taxes initially decline, but then rise again as trade costs fall even further. A range of trade costs is identified where economic integration raises the welfare of the small country, but lowers welfare in the large country.
Original languageEnglish
Pages (from-to)239-248
Number of pages10
JournalJournal of International Economics
Volume80
Issue number2
DOIs
Publication statusPublished - Mar 2010

Keywords

  • tax competition
  • subsidy competition
  • oligopolistic markets
  • economic integration

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