This model shows equilibrium outcomes in autarky under monopolistic competition, indicating implications for trade costs.
The article studies a model of international trade between two countries under monopolistic competition of producers. The utility functions of consumers are additively separable. Transport costs are of the iceberg type. The production cost function is nonlinear: marginal costs are a decreasing function of R&D investments. The article considers market equilibrium in autarky situation, when transport costs are so high that international trade ceases. Comparative statics is carried out on transport costs of equilibrium variables (individual consumption, size and mass of firms, and prices), as well as social welfare.
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I. A. Bykadorov (2025) studied this question.
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