NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Oligopoly in Segmented Markets

Shmuel Ben-Zvi, Elhanan Helpman

NBER Working Paper No. 2665
Issued in July 1988
NBER Program(s):   ITI   IFM

We propose a new solution concept for a game among oligopolists that simultaneously compete in several segmented markets. The motivation for this solution comes from international trade, but it also has applications in other areas. It is based on a three-stage extension of the two-stage Kreps-Scheinkman game. We show that two-way trade is not an equilibrium outcome and that there exist bounds on possible cross-market priced differentials that are defined by transport costs. Prices are the same when transport costs are zero. In fact, in the limiting case of zero transport costs the equilibrium coincides with a Cournot equilibrium in a single integrated market. In the presence of transport coats there nay exist multiple equilibria.

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Document Object Identifier (DOI): 10.3386/w2665

Published: Monopolistic Competition and International Trade, MIT Press 1992 G.M. Grossman ed

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