Working Paper: CEPR ID: DP7600
Authors: J. Peter Neary
Abstract: This paper discusses the place of oligopoly in international trade theory, and argues that it is unsatisfactory to ignore firms altogether, as in perfectly competitive models, or to view large firms as more productive clones of small ones, as in monopolistically competitive models. Doing either fails to account for the "granularity" in the size distribution of firms and for the dominance of large firms in exporting. The paper outlines three ways of developing more convincing models of oligopoly, which allow for free entry but do not lose sight of the grains in "granularity": heterogeneous industries, natural oligopoly, and superstar firms.
Keywords: General Oligopolistic Equilibrium; Granularity; Heterogeneous Firms; International Trade; Market Structure
JEL Codes: F10; F12
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| size distribution of firms (L25) | export capabilities (F10) |
| ignoring oligopoly (D43) | oversimplified models (C20) |
| failing to consider oligopolistic structures (D43) | erroneous policy implications (D78) |
| models based on perfect competition (D41) | misrepresentation of large firms' role in exporting (F10) |