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Price‐cost Margins and Economic Integration: How Important is the Pro‐competitive Effect?
Author(s) -
BajoRubio Oscar,
DíazRoldán Carmen,
GómezPlana Antonio G.
Publication year - 2015
Publication title -
the world economy
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.594
H-Index - 68
eISSN - 1467-9701
pISSN - 0378-5920
DOI - 10.1111/twec.12245
Subject(s) - economics , margin (machine learning) , offset (computer science) , price setting , microeconomics , set (abstract data type) , perfect competition , industrial organization , international economics , computer science , machine learning , programming language
In this paper, we examine whether the so‐called pro‐competitive effect holds when two countries integrate by forming a common market. We propose a general framework of reference, where the price‐cost margin of domestic firms depends on a set of variables in addition to trade costs with the partner country, which might eventually offset the conventional result.