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| Author: | Mercenier, J. Schmitt, N. |
| Title: | On sunk costs and trade liberalization in applied general equilibrium |
| Journal: | International Economic Review
1996 : AUG, VOL. 37:3, p. 553-572 |
| Index terms: | INTERNATIONAL ECONOMICS INCOMES |
| Language: | eng |
| Abstract: | The authors argue that the rationalization gains often predicted by static applied general equilibrium models with imperfect competition and scale economies are artificially boosted by an unrealistic treatment of fixed costs. They introduce sunk costs into one such model calibrated with real-world data. They also show how this changes the oligopoly game in a way significant enough to affect, both qualitatively and quantitatively, the outcome of a trade liberalization exercise. |
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