Frontiers of Economics in China
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.
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Original Publication Citation
Zhou, H. (2014). International trade with increasing returns in the transportation sector. Frontiers of Economics in China, 9(4), 606-633. https://doi.org/10.3868/s060-003-014-0028-0
Zhou, Haiwen, "International Trade with Increasing Returns in the Transportation Sector" (2014). Economics Faculty Publications. 61.