Online RA-seminar (Dec 11)
On Friday, December 11, Fedor Slepov (Academic Supervisor - Sergey G. Kokovin) will give a presentation on The existence of equilibrium in the Krugman trade model' at our online research seminar.
Kokovin S., Slepov F. The existence of equilibrium in the Krugman trade model
In our study we seek to answer the question “does general Krugman trade model always have an equilibrium point”. Krugman model signifies a new era in the study of international economics being the center part of New Trade Theory. Krugman (1979, 1980) and other scholars gave rise to this theory when they adapted Dixit and Stiglitz's (1977) model of monopolistic competition to international/interregional economy. Further model development by Melitz (2003), Melitz and Ottaviano (2008) and others included heterogeneous firms into the analysis to highlight the selection effects. Other extensions included multiple sectors, non-CES preferences, variable technology, etc. The ubiquitous use of this model and its extensions afford great importance to the question we endeavor to answer. The model remains a popular approach for some research questions such as microfoundations of gravity equations or disclosing the trade elasticity. This model is also quite helpful for analysis of pro-competitive effects like Mrazova and Neary (2014), Bertoletti and Epifani (2014), imbalanced trade (Epifani and Gancia, 2015), and for welfare analysis (Arkolakis et al., 2015). Notwithstanding its popularity, the issue of equilibrium existence was not properly resolved. That question is essential since the outcome of such an equilibrium finding determines whether this whole model is applicable to reality and whether we are justified in further developing it. We seek to fill this still persisting void by proving that equilibrium exists under quite general assumptions regarding elementary utility function. We anticipate that we will ascertain an existence of equilibria and find some way through which it would become possible to obtain this equilibrium in simulations.
Working language of the seminar: Russian