ECON 101 Lecture 9: Lecture 09 - Imperfect Competition and Market Segmentation
Document Summary
Lecture 09 - imperfect competition and market segmentation. Classic trade vs. intra-industry trade: perfect competition does not prevail in practice. This can be caused by market imperfections or economies of scale: scale economies and increasing returns in production constitute a further reason for trade. Firms centralize production and export: external economies of scale and externalities constitute a reason to restrict trade. Infant industries may deserve protection: imperfect competition is necessary to reward innovators and therefore closely tied to endogenous growth. Increasing returns to scale from fixed costs. Trade under internal returns to scale: monopolistic competition. Varieties of the same good are traded between countries. Trade between similar countries is mostly intra-industry trade. Think pepsi vs. coca-cola: pepsi has some people who prefer it to coke, but raise price too high, and they"ll lose those people to coke. For our purposes, we say that firms don"t interact strategically with each other: market segmentation (dumping)
