International Trade with Increasing Returns in the Transportation Sector

Haiwen Zhou
2014 Social Science Research Network  
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 engage in oligopolistic competition and choose technologies optimally, the model is tractable and results are derived analytically. Technology adoptions in the manufacturing sector and in the transportation sector are
more » ... 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.
doi:10.2139/ssrn.2392692 fatcat:gcf45s6z6fg6lmiou6ox5reeku