A general equilibrium analysis of the effects of the formation of customs union on the member countries and non-member countries under imperfect competition

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In this research project, I investigated some aspects of the process of policy adjustments performed by the trading countries which aim to form free trade areas and customs union. I introduced imperfect competitive markets in the analyses. The framework of the analyses is basically general equilibrium.First, in a two-country, two-good, arbitrary many factor of production trading model in which one market is international oligopoly, I analyzed the effects of a VERs and quotas on the welfare of the importing country and compared the welfare levels with that under free trade.Secondly I examined the equivalence of tariffs and quotas imposed on oligopolistic intermediate input markets. We focus on a Cournot-Nash equilibrium and show that the outcome depends on the values of the structural parameters of the economy, the price elasticity of demand for the final good and the elasticity of substitution between the intermediate inputs. This analysis could be straightforwardly extended to a tree country model of customs union in which a country importing two intermediate goods forms customs union with one of the trading countries.I next studied the effects of a change in the level of quantity restriction on the behavior of the domestic firm and on the welfare of the importing country. It is shown that the results obtained by predecessors based on linear demand, constant elasticity demand, strategic substitutes and so forth all emerge as special cases.I am now studying a following problem : Which partner is more preferable for a country to form a customs union with, a country with imperfectly competitive markets or a country with perfectly competitive markets?