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Frontiers of Economics in China

Front. Econ. China    2014, Vol. 9 Issue (4) : 606-633     DOI: 10.3868/s060-003-014-0028-0
research-article |
International Trade with Increasing Returns in the Transportation Sector
Haiwen Zhou()
Department of Economics, Old Dominion University, Norfolk, VA 23529, USA
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In this general equilibrium framework, the transportation sector is modeled as a distinct sector with increasing returns. A more advanced technology has a higher fixed cost but a lower marginal cost of production. Even with both manufacturing firms and transportation firms engaged in oligopolistic competition and optimally choosing their technologies, the model is tractable and results are derived analytically. Technology adoptions in the manufacturing sector and transportation sector are reinforcing, and multiple equilibria may exist. Firms choose more advanced technologies and the prices decrease when the size of the population is larger.

Keywords transportation costs      international trade      the choice of technology      increasing returns      strategic complementarity     
Issue Date: 11 December 2014
 Cite this article:   
Haiwen Zhou. International Trade with Increasing Returns in the Transportation Sector[J]. Front. Econ. China, 2014, 9(4): 606-633.
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