Strategic Investment and Trade in an Oligopolistic Setting
Date
2013Author
Alexa, Ioana-Veronica
Toma, Simona Valeria
Şarpe, Daniela Ancuţa
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This paper analyses the international trade dynamics between two countries as a twoplayer,
non-zero sum, cooperative game. The reason behind this type of approach is that we
consider game theory as an important instrument for the analysis of international trade
dynamics. The model that we develop in this paper follows the multi-sectorial generalequilibrium
model of oligopoly and trade. We will analyze the case where trade takes place
because of oligopolistic interaction and comparative advantage. Even though we follow the
general framework, the main departure from the existing models on the subject is that in
our model both labor and capital are used in production and that the firms have a choice
between specializing in labor or capital-intensive goods by choosing weather or not to
invest in capital and therefore use two factors of production. As required by a general
equilibrium model, we will try to establish an equilibrium on both labor and capital
markets and we will try to determine the labor and capital intensity in both countries as
well as the equilibrium level of the wage and rental rate.
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- 2013 fascicula1 nr2 [12]