McGraw-Hill/Irwin Copyright  2009 by The McGraw-Hill Companies, Inc. All rights reserved. Chapter 6: Scale Economies, Imperfect Competition, and Trade

Introduction Chapter Objective: To learn and understand the major developments in trade theories after the second World War.

6-3  Contents Intra-Industry Trade Intra-Industry Trade Economies of Scale Economies of Scale Product Differentiation Product Differentiation Overlapping Demand Overlapping Demand Product Cycle Product Cycle

Intra-Industry Trade 产业内贸易  Definition Intra-Industry Trade VS Inter-Industry Trade

6-5  Measurement Intra-Industry Trade Index IIT X = 1 - Exports X - Imports X Exports X + Imports X 0 < IIT X < 1

6-6 IIT as a Percentage of Trade in Nonfood Manufactured Goods Country United States Canada Japan Germany France United Kingdom

Trade with Economies of Scale  Internal Economies of Scale  External Economies of Scale

6-8 Internal vs. External Economies of Scale Firm’s AC X O Firm’s Output of X AC X Firm’s AC X O Industry Output of X AC X (a) Internal(b) External

6-9  Internal Economies of Scale  Monopolistic Competition 垄断竞争 Modest Scale Economies  Oligopoly 寡头垄断 Substantial Scale Economies

6-10  Monopolistic Competition and Trade Firm’s Production Decision without Trade 封闭条件下厂商的生产决策

6-11 Price and Cost per unit (Millions of yen per car) Quantity (Millions of cars per year) MR Marginal Cost Average Cost Demand (D 0 ) Figure 6.4 The Monopoly Element in Monopolistic Competition

6-12 Demand (D 0 ) Figure 6.5 The Competition Element in Monopolistic Competition

6-13 Firm’s Production Decision Under Free Trade 开放贸易条件下厂商的生产决策

6-14 Figure 6.6 The Same Monopolistic Competitor after Opening Trade

6-15 Trade and Market Equilibrium 自由贸易条件下的市场均衡

6-16 Figure 6.7 The Automobile Market with No Trade and with Free Trade

6-17 Basis for Trade  Product Differentiation 产品差异  Scale Economies 规模经济

6-18 Gains from Trade  More Varieties  Lower Prices

6-19 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.

6-20  Oligopoly and International Trade Oligopoly 寡头 Duopoly 双寡头 Large Civil Aircraft Market  Boeing  Airbus

6-21 Oligopoly and Trade Pattern Production is concentrated in a few countries, which are net exporters, and other countries are importers.

6-22 What is behind this pattern ?  Comparative Advantage  Economies of Scale

6-23 Can this pattern be changed ? Not easily.  Scale Economies  New entrants may suffer losses for price reductions and competition from old firms.

6-24 Oligopoly and Gains from Trade  Oligopoly pricing  National support for high- profit oligopoly firms

6-25 Industrial Agglomeration 产业集聚  Silicon Valley  Hollywood  Wall Street  External Economies of Scale

(Short-run) (Long-run)

6-27 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.

6-28 Trade pattern Similar to trade with substantial internal economies of scale. Determination of locations Size of domestic market Historical luck Government push

Technology-Based Theories of Trade: The Product Cycle Raymond Vernon 1966 雷蒙德 · 弗农 ( ) Harvard University

6-30 Product Cycle  New product Mature product Standardized product  Introduction Growth Maturity Decline

6-31 O Export Import t1t1 t2t2 t3t3 t4t4 t5t5 t Innovating Country Developed Countries Developing Countries

Overlapping Demands as a Basis for Trade Staffan B. Linder 1961 林德

6-33 Product Quality O Income Q A max Q A mim I A mim I A max

6-34 Product Quality O Income Q A max Q A mim I A mim I A max I B mim I B max Q B max Q B mim Income Overlap Trade

6-35 SUMMARY  Intra-Industry Trade  Economies of Scale  Product Cycle Hypothesis  Overlapping-Demand Hypothesis

6-36

6-37

6-38

6-39

6-40

6-41

6-42

6-43

6-44

6-45