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Sub-national Differentiation and the Role of the Firm in Optimal International Pricing / Edward J. Balistreri, James R. Markusen.
- Format:
- Book
- Author/Creator:
- Balistreri, Edward J.
- Series:
- Working Paper Series (National Bureau of Economic Research) no. w13130.
- NBER working paper series no. w13130
- Language:
- English
- Physical Description:
- 1 online resource: illustrations (black and white);
- Place of Publication:
- Cambridge, Mass. National Bureau of Economic Research 2007.
- Summary:
- We illuminate the relationship between optimal firm pricing and optimal trade policy by exploring a generalized model that accommodates product differentiation at both the national and sub-national (firm) levels. We assume monopolistic competition in the differentiated products at the sub-national level. When the national and sub-national substitution elasticities are similar we find little opportunity for small countries to improve their terms of trade through trade distortions, because firms play an important preemptive role in optimally pricing unique varieties. We contrast this with standard applications of perfect-competition Armington models, which exhibit high optimal tariffs--even for relatively small countries.
- Notes:
- Print version record
- May 2007.
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