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McGraw-Hill/Irwin Copyright 2009 by The McGraw-Hill Companies, Inc. All rights reserved.
Chapter 6: Scale Chapter 6: Scale Economies, Imperfect Economies, Imperfect
Competition, and TradeCompetition, and Trade
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6.1 Introduction
Chapter Objective:
To learn and understand the major developments in trade theories after the second World War.
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ContentsContents Intra-Industry TradeIntra-Industry Trade Economies of ScaleEconomies of Scale Product DifferentiationProduct Differentiation Overlapping DemandOverlapping Demand Product CycleProduct Cycle
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6.2 Intra-Industry Trade 产业内贸易
Definition
Intra-Industry Trade VS Inter-Industry Trade
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Measurement
Intra-Industry Trade Index
IITX = 1 -ExportsX - ImportsX
ExportsX + ImportsX
0 < IITX< 1
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IIT as a Percentage of Trade in Nonfood Manufactured Goods
CountryCountry 19891989 20052005
United StatesUnited States 55.355.3 58.358.3
CanadaCanada 54.354.3 63.263.2
JapanJapan 27.827.8 41.241.2
GermanyGermany 62.662.6 67.567.5
FranceFrance 71.371.3 73.973.9
United KingdomUnited Kingdom 69.069.0 71.771.7
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6.3 Trade with Economies of Scale
Internal Economies of Scale
External Economies of Scale
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Internal vs. External Economies of Scale
Firm’s ACX
O Firm’s Output of X
ACX
Firm’s ACX
O Industry Output of X
ACX
(a) Internal (b) External
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Internal Economies of Scale
Monopolistic Competition 垄断竞争 Modest Scale Economies
Oligopoly 寡头垄断 Substantial Scale Economies
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Monopolistic Competition and Trade
Firm’s Production Decision without Trade 封闭条件下厂商的生产决策
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Price and Cost per unit(Millions of yen per car)
Quantity
(Millions of cars per year)
MR0
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1.5
3.1
Marginal Cost
Average Cost
Demand (D0)
Figure 6.4
The Monopoly Element in Monopolistic Competition
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Demand (D0)
Figure 6.5
The Competition Element in Monopolistic Competition
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Firm’s Production Decision Under Free Trade 开放贸易条件下厂商的生产决策
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Figure 6.6
The Same Monopolistic Competitor after Opening
Trade
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Trade and Market Equilibrium 自由贸易条件下的市场均衡
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Figure 6.7
The Automobile Market with No Trade and with Free Trade
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Basis for Trade
Product Differentiation 产品差异 Scale Economies
规模经济
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Gains from Trade
More Varieties
Lower Prices
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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.
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Oligopoly and International Trade
Oligopoly 寡头
Duopoly 双寡头 Large Civil Aircraft Market
Boeing Airbus
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Oligopoly and Trade Pattern
Production is concentrated in a few countries, which are net exporters, and other countries are importers.
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What is behind this pattern ?
Comparative Advantage
Economies of Scale
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Can this pattern be changed ?Not easily.
Scale Economies
New entrants may suffer losses for price reductions and competition from old firms.
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Oligopoly and Gains from Trade
Oligopoly pricing
National support for high-profit oligopoly firms
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Industrial Agglomeration
产业集聚 Silicon Valley Hollywood Wall Street
External Economies of Scale
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(Short-run)
(Long-run)
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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.
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Trade pattern
Similar to trade with substantial
internal economies of scale.
Determination of locations
• Size of domestic market
• Historical luck
• Government push
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6.4 Technology-Based Theories of Trade: The Product Cycle
Raymond Vernon 1966
雷蒙德 ·弗农 (1913-1999)
Harvard University
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Product Cycle
New product Mature product Standardized product
Introduction Growth Maturity Decline
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O
Export
Import
t1 t2 t3 t4 t5 t
Innovating Country
Developed Countries
Developing Countries
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6.5 Overlapping Demands as a Basis for Trade
Staffan B. Linder 1961
林德
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Product Quality
O Income
QAmax
QAmim
IAmim IA
max
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Product Quality
O Income
QAmax
QAmim
IAmim IA
maxIBmim IB
max
QBmax
QBmim Income
Overlap
Trade
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SUMMARY
Intra-Industry Trade
Economies of Scale
Product Cycle Hypothesis
Overlapping-Demand Hypothesis
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