Market, Trade and Welfare in General Equilibrium

Abstract

This paper develops a tractable general equilibrium model of an economy with an arbitrary number of industries under increasing returns to scale and imperfect competition. The market structure of the model economy is expressed by two basic sets of parameters: the degree of competition, and the markup ratio prevailing in each industry. The government is supposed to control the degree of competition through antitrust policy and the markup ratio through entry policy. Using this model, I reexamine the results of traditional competitive equilibrium analysis and explore the effects of competition policies on economic welfare and international trade. JEL Classi®cation Numbers: D43, D50, F11, F12, L13, L41.