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Competitive versus comparative advantage
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TL;DR: In this article, the authors explore the interactions between comparative, competitive and absolute advantage in a two-country model of oligopoly in general equilibrium and show that both competitive and relative advantage affect resource allocation, trade patterns and trade volumes.
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Abstract: I explore the interactions between comparative, competitive and absolute advantage in a two-country model of oligopoly in general equilibrium. Comparative advantage always determines the direction of trade, but both competitive and absolute advantage affect resource allocation, trade patterns and trade volumes. Competitive advantage in the sense of more home firms drives foreign firms out of marginal sectors but also makes some marginal home sectors uncompetitive. Absolute advantage in the sense of a uniform fall in home costs tends to raise home output in all sectors but also leads both countries to specialise less in accordance with comparative advantage.
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Oligopoly and Trade
TL;DR: In this article, the authors present a selective analytic survey of some of the main results of trade under oligopoly, focusing on three topics: oligopoly as an independent determinant of trade, as illustrated by the reciprocal-markets model of Brander (1981); oligopolies as a rationale for government intervention; and the challenges and potential of embedding trade in oligopoly in general equilibrium.
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