RIEB Discussion Paper Series No.2024-21

Title

Strategic Export Decisions in International Trade

Abstract

The type of marginal cost faced by a firm is important when considering the firm's export behavior. However, in the literature, it is frequently assumed that firms have constant marginal costs. By contrast, this paper considers the case in which a firm's marginal cost is increasing, and the firm pays a fixed cost when it exports. We show that an asymmetric trade pattern, whereby one country exports but the other does not, appears in a symmetric two-country two-firm setting. We also show that trade liberalization produces a non-monotonic change in welfare because of reduced transport costs.

Keywords

Increasing marginal cost; Fixed export cost; Transport cost; Trade pattern

JEL Classification

F12, L13, D43

Inquiries

Kazuhiro TAKAUCHI
Faculty of Business and Commerce, Kansai University
Graduate School of Economics, Kobe University

Tomomichi MIZUNO
Graduate School of Economics, Kobe University

Katsufumi FUKUDA
School of Global Studies, Chukyo University
Research Institute for Economics and Business Administration (RIEB)
Kobe University
Rokkodai-cho, Nada-ku, Kobe
657-8501 Japan
Phone: +81-78-803-7036
FAX: +81-78-803-7059