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2020 | OriginalPaper | Chapter

Investments in R&D in Monopolistic Competitive Trade Model

Author : Igor Bykadorov

Published in: Mathematical Optimization Theory and Operations Research

Publisher: Springer International Publishing

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Abstract

We study a monopolistic competition model in the open economy case. The utility of consumers are additive separable. The producers can choose technology (R&D) endogenously. We examine the local comparative statics of market equilibrium with respect to trade costs (of iceberg type). Our main finding is the following: increasing trade costs has opposite impacts on mass of firms and productivity. Moreover, we study the cases of small trade costs and symmetric (on numbers of consumers) countries.

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previous chapter Dixit-Stiglitz-Krugman Model with Nonlinear Costs
next chapter On the Cooperative Behavior in Multistage Multicriteria Game with Chance Moves
Footnotes
1
Some stylized facts that we believe to be a challenge for theory are, e.g., in [2, 14, 18, 22, 23]. The details see, e.g., in [12, 13].
 
2
There can be a different approach, see, e.g., [15, 20, 21, 26]. The details see, e.g., in [12].
 
3
To sell a unit, the firm produce the \(\tau \cdot 1\).
 
4
Here \({\varepsilon }_{V}\left( \cdot \right) \) is the “partial” elasticity of production costs with respect to firm size:
$$ {\varepsilon }_{V}\left( \xi \right) =\frac{\partial V\left( \xi ,\eta \right) }{\partial \xi }\cdot \frac{\xi }{V\left( \xi ,\eta \right) }. $$
.
 
5
The discuss this system of equations can be found, e.g., in [12].
 
6
Namely, the solution of these equations can be considered as implicit function of two parameters, \(\displaystyle \frac{L}{L+l}\) (the share of the population of big country in total population) and \(\displaystyle \frac{1}{\tau }\) (the parameter of trade liberalization). Without loss of generality (cf. [12]) we can assume that couple \(\displaystyle \left( \frac{L}{L+l},\frac{1}{\tau }\right) \) belongs to the rectangle \(\displaystyle \left[ \frac{1}{2},1\right] \times \left[ 0,1\right] .\) The idea is to get the answers to the questions above for the boundary of this rectangle, see details in [12].
 
7
For policy-making (cf. [13]), our topic may be interesting because of new understanding of gains from trade: technological changes in response to trade liberalization. Furthermore, for modernization and active industrial policy practiced in some countries it can be interesting, which equilibrium outcome in various sectors may follow from some stimulating measures like tax reductions conditional on \( R \& D\).
 
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Metadata
Title
Investments in R&D in Monopolistic Competitive Trade Model
Author
Igor Bykadorov
Copyright Year
2020
Book
Mathematical Optimization Theory and Operations Research

Print ISBN: 978-3-030-49987-7

Electronic ISBN: 978-3-030-49988-4

Copyright Year: 2020

DOI
https://doi.org/10.1007/978-3-030-49988-4_12

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