Abstract:
A model of international trade between two countries under monopolistic competition of producers is investigated. The consumer utility functions are additively separable, transport costs are taken as an iceberg type, the production cost function is nonlinear: Marginal costs are a decreasing function of R&D investments. Market equilibrium is considered in the autarky situation, when transport costs are so high that international trade ceases. Comparative statics is carried out on transport costs of equilibrium variables (individual consumption, size and mass of firms, and prices), as well as social welfare. Bibliogr. 10.
Keywords:monopolistic competition, international trade, consumer, producer, investments in R&D, iceberg transport costs, equilibrium, autarky.
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