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Chapter 6: Scale Economies, Imperfect Competition, and Trade. 6.1 Introduction. Chapter Objective: To learn and understand the major developments in trade theories after the second World War. Contents. Intra-Industry Trade Economies of Scale Product Differentiation Overlapping Demand

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Presentation Transcript
slide2

6.1 Introduction

Chapter Objective:

To learn and understand the major developments in trade theories after the second World War.

contents
Contents
  • Intra-Industry Trade
  • Economies of Scale
  • Product Differentiation
  • Overlapping Demand
  • Product Cycle
slide4

6.2 Intra-Industry Trade

产业内贸易

  • Definition

Intra-Industry Trade

VS

Inter-Industry Trade

slide5

Measurement

Intra-Industry Trade Index

ExportsX - ImportsX

IITX = 1 -

ExportsX + ImportsX

0 < IITX< 1

slide6

IIT as a Percentage of Trade

in Nonfood Manufactured Goods

slide7

6.3 Trade with

Economies of Scale

  • Internal Economies of Scale
  • External Economies of Scale
slide8

Internal vs. External

Economies of Scale

Firm’s

ACX

Firm’s

ACX

ACX

ACX

O Firm’s Output

of X

O Industry Output

of X

(a) Internal

(b) External

slide9

Internal Economies of Scale

  • Monopolistic Competition

垄断竞争

Modest Scale Economies

  • Oligopoly

寡头垄断

Substantial Scale Economies

slide10

Monopolistic Competition

and Trade

  • Firm’s Production

Decision without Trade

封闭条件下厂商的生产决策

slide11

Figure 6.4

The Monopoly Element in Monopolistic Competition

Price and Cost per unit

(Millions of yen per car)

3.1

Demand (D0)

1.5

Average Cost

Marginal Cost

6

Quantity

(Millions of cars per year)

MR0

slide12

Figure 6.5

The Competition Element in Monopolistic Competition

Demand (D0)

slide13

Firm’s Production

Decision Under Free Trade

开放贸易条件下厂商的生产决策

slide14

Figure 6.6

The Same Monopolistic Competitor after Opening Trade

slide15

Trade and Market Equilibrium

自由贸易条件下的市场均衡

slide16

Figure 6.7

The Automobile Market with No Trade and with Free Trade

slide17

Basis for Trade

    • Product Differentiation

产品差异

    • Scale Economies

规模经济

slide18

Gains from Trade

    • More Varieties
    • Lower Prices
slide19

Welfare effects

  • Little impact on income distribution between different factor owners.
  • Gains from greater variety can offset losses in factor income resulting from inter-industry shifts in production.
slide20

Oligopoly and International

Trade

  • Oligopoly 寡头

Duopoly 双寡头

Large Civil Aircraft Market

    • Boeing
    • Airbus
slide21

Oligopoly and Trade Pattern

Production is concentrated in a few countries, which are net exporters, and other countries are importers.

slide22

What is behind this pattern ?

    • Comparative Advantage
    • Economies of Scale
slide23

Can this pattern be changed ?

Not easily.

    • Scale Economies
    • New entrants may suffer

losses for price reductions

and competition from old

firms.

slide24

Oligopoly and Gains from Trade

    • Oligopoly pricing
    • National support for high-profit oligopoly firms
slide25

External Economies of Scale

  • Industrial Agglomeration
  • 产业集聚
  • Silicon Valley
  • Hollywood
  • Wall Street
slide26

(Short-run)

(Long-run)

46

slide27

Welfare effects

  • Producers in the exporting country tend to gain producer surplus despite of decline in price.
  • Producers in the importing country lose producer surplus.
  • Consumers in both countries gain consumer surplus.
slide28

Trade pattern

Similar to trade with substantial

internal economies of scale.

  • Determination of locations
  • Size of domestic market
  • Historical luck
  • Government push
slide29

6.4 Technology-Based Theories of

Trade: The Product Cycle

Raymond Vernon 1966

雷蒙德·弗农 (1913-1999)

Harvard University

slide30

Product Cycle

  • New product Mature product
  • Standardized product
  • Introduction Growth
  • Maturity Decline
slide31

Innovating Country

Developed Countries

Export

t1

t2

t3

t4

t5

t

O

Import

Developing Countries

slide32

6.5 Overlapping Demands

as a Basis for Trade

Staffan B. Linder 1961

林德

slide33

Product Quality

QAmax

QAmim

O Income

IAmim

IAmax

slide34

Product Quality

Trade

QBmax

QAmax

QBmim

Income

Overlap

QAmim

O Income

IAmim

IBmim

IAmax

IBmax

slide35

SUMMARY

  • Intra-Industry Trade
  • Economies of Scale
  • Product Cycle Hypothesis
  • Overlapping-Demand Hypothesis