Imperfect Competition Under The Conditions Of International Trade

IAfter the World War II, there emerged many new phenomena emerged in the international trade area. A conspicuous thing is the insurgence of the intra-industry trade, which constituted an impact upon the classic international trade theories.According to the theory of comparative advantage by David Ricardo and the theory of factor endowment by Heckscher and Ohlin, international trade should always occur between the countries that differ considerably in factor endowment. However, intra-industry trade occurred among industrialized countries similar in factor endowment, and they traded similar or even the same goods. Such new phenomena call for a new theoretical explanation.Trying to explain the new phenomena, many economists unanimously put their eyes on the hypotheses of the classic theories of international trade. They pointed it out that under the imperfect competitive market we will get quite different result while applying the classic theories. In order to explain the new phenomena in international trade, many economists resorted to employ imperfect competition, scale economy and externalities.IIEntertaining the ideal of proffering someway for the development of our foreign trade, I explore the new theories of international trade to provide a new thinking of developing international trade, on the basis of domestic and foreign economists' research and connecting China's contemporary facts. The logical instruction of my thesis starts from a brief introduction to the classic theories of international trade, followed by a detailed description of the new theories of international trade under imperfect competition and their policy suggestions, and finally the adaptability of such theories and policies in China. According to this main clue, the thesis is divided into three parts.Part one is the Preface. In this part, the thesis firstly introduces the development of the classic theories of international trade, ranging from David Richardo, Heckscher——Ohlin and their theories. The author emphasizes the hypotheses of imperfect competition, which is their characteristic in common. By loosing certain minor hypotheses of the classic theories of international trade, the thesis initiates the neo-classic theories of international trade. Neo-classic theories extend classic theories to more than two countries, more than two factors and more than two commodities. But the neo-classic theories are still regarded as traditional, together with the classic theories, because they base on the same hypothesis when they analyze the causes of international trade.Part two is divided into three sections. The first section analyzes several prevailing models of international trade while under imperfect competition. In order to comprehend the background of the emergence of new theories, the thesis illustrates the limits of traditional prior to process the models. The main limits of traditional theories are listed as the following: 1, the limit of their hypotheses. They assume that the commodity, labor and factor markets are perfect competitive. Under such circumstances, the prices equal the marginal costs, so it is easy to establish the comparative advantage of each country. Also, David Richardo looked technology as unchangeable. Although Heckscher and Ohlin noticed the technology improvement in a way, they never regarded it as an independent factor for the cause of international trade. In addition, to simplify analysis, economists ignored the scale economy, although they know the law of increasing or diminishing return. 2,the limit of research methods. When they analyze the cause of international trade, traditional economists only employed the way of supply analysis, ignoring the demand. It is well known that demand is every bit as important as supply and any analysis method excluding it is not reliable. 3, the limit of the explanations for real economy. Traditional theories are adept in explaining the cause of exchange for preliminary products, but they cannot constitute any explanation for high-tech products; they ar...