$TITLE Model M54-MCP: Two-Country Oligopoly with free entry * MCP version $ONTEXT YI YJ XI XJ NI NJ WI WJ CONI CONJ EHTI ENTJ PYI 100 -100 PYJ 100 -100 PXI 100 -50 -50 PXJ 100 -50 -50 FCI 20 -20 FCJ 20 -20 ZI -40 -48 -12 100 ZJ -40 -48 -12 100 WI -60 -32 -8 100 WJ -60 -32 -8 100 PUI 200 -200 PUJ 200 -200 MKI -10 -10 10 10 MKJ -10 -10 10 10 $OFFTEXT PARAMETERS ENDOWIL ENDOWIS ENDOWJL ENDOWJS TC SUBSIDY MODELSTAT REALWI REALWJ REALZI REALZJ; ENDOWIL = 1; ENDOWIS = 1; ENDOWJL = 1; ENDOWJS = 1; TC = 0; SUBSIDY = 0; POSITIVE VARIABLES YI YJ WFI WFJ XI XII XIJ XJ XJJ XJI NI NJ PY PUI PUJ WI WJ ZI ZJ PXI PXJ PXDI PXDJ PFI PFJ CONSI CONSJ ENTI ENTJ MARKII MARKIJ MARKJI MARKJJ; EQUATIONS DXDI X output in country i DXI Demand for X in country i DXDJ X output in country j DXJ Demand for X in country j DY Demand for Y DWI Demand for welfare in country i DWJ Demand for welfare in country j DFI Demand for fixed costs in i DFJ Demand for fixed costs in j PRXDI Marginal cost of X in i PRXII MR = MC for XII PRXIJ MR = MC for XIJ PRXDJ Marginal cost of X in j PRXJJ MR = MC for Xjj PRXJI MR = MC for Xji PRYI Zero profits for YI PRYJ Zero profits for YJ PRWI Zero profits for WFI PRWJ Zero profits for WFJ PRFI Zero profits for FI PRFJ Zero profits for FJ SKLABI Market clearing for SI SKLABJ Market clearing for SJ UNLABI Market clearing for LI UNLABJ Market clearing for LJ ICONSI Consumer income in i ICONSJ Consumer income in j IENTREI Entreprenuer's income (markups) in i IENTREJ Entrepreneur's income (markups) in j MKII Markup ii MKIJ Markup ij MKJJ Markup jj MKJI Markup ji; PRXDI.. (WI**0.40)*(ZI**0.60)*(1-SUBSIDY) =G= PXDI; PRXDJ.. (WJ**0.40)*(ZJ**0.60) =G= PXDJ; PRXII.. PXDI =G= PXI*(1 - MARKII); PRXIJ.. PXDI*(1+TC) =G= PXJ*(1 - MARKIJ); PRXJJ.. PXDJ =G= PXJ*(1 - MARKJJ); PRXJI.. PXDJ*(1+TC) =G= PXI*(1 - MARKJI); PRYI.. (WI**0.60)*(ZI**0.40) =G= PY; PRYJ.. (WJ**0.60)*(ZJ**0.40) =G= PY; PRWI.. ((PXI/1.25)**0.5)*(PY**0.5) =G= PUI; PRWJ.. ((PXJ/1.25)**0.5)*(PY**0.5) =G= PUJ; PRFI.. (WI**0.40)*(ZI**0.60) =G= PFI; PRFJ.. (WJ**0.40)*(ZJ**0.60) =G= PFJ; DXDI.. XII*40 + XIJ*40*(1+TC) =E= XI*80; DXDJ.. XJJ*40 + XJI*40*(1+TC) =E= XJ*80; DXI.. (XII*40 + XJI*40) =E= 0.5*CONSI/PXI; DXJ.. (XJJ*40 + XIJ*40) =E= 0.5*CONSJ/PXJ; DY.. (YI + YJ)*100 =E= 0.5*(CONSI + CONSJ)/PY; DWI.. WFI*200 =E= CONSI/PUI; DWJ.. WFJ*200 =E= CONSJ/PUJ; DFI.. NI*8 =G= ENTI/PFI; DFJ.. NJ*8 =G= ENTJ/PFJ; SKLABI.. 100*ENDOWIS =E= 0.40*(WI**0.60)*(ZI**(0.40-1))*YI*100 + 0.60*(WI**0.40)*(ZI**(0.60-1))*(XII+XIJ*(1+TC))*40 + 0.60*(WI**0.40)*(ZI**(0.60-1))*NI*8; SKLABJ.. 100*ENDOWJS =E= 0.40*(WJ**0.60)*(ZJ**(0.40-1))*YJ*100 + 0.60*(WJ**0.40)*(ZJ**(0.60-1))*(XJJ+XJI*(1+TC))*40 + 0.60*(WJ**0.40)*(ZJ**(0.60-1))*NJ*8; UNLABI.. 100*ENDOWIL =E= 0.60*(WI**(0.60-1))*(ZI**0.40)*YI*100 + 0.40*(WI**(0.40-1))*(ZI**0.60)*(XII+XIJ*(1+TC))*40 + 0.40*(WI**(0.40-1))*(ZI**0.60)*NI*8; UNLABJ.. 100*ENDOWJL =E= 0.60*(WJ**(0.60-1))*(ZJ**0.40)*YJ*100 + 0.40*(WJ**(0.40-1))*(ZJ**0.60)*(XJJ+XJI*(1+TC))*40 + 0.40*(WJ**(0.40-1))*(ZJ**0.60)*NJ*8; ICONSI.. CONSI =E= ZI*100*ENDOWIS + WI*100*ENDOWIL -(WI**0.40)*(ZI**0.60)*SUBSIDY*XI*80; ICONSJ.. CONSJ =E= ZJ*100*ENDOWJS + WJ*100*ENDOWJL; IENTREI.. ENTI =G= MARKII*PXI*XII*40 + MARKIJ*PXJ*XIJ*40; IENTREJ.. ENTJ =G= MARKJJ*PXJ*XJJ*40 + MARKJI*PXI*XJI*40; MKII.. MARKII =E= XII/(NI*(XII + XJI)); MKIJ.. MARKIJ =E= XIJ/(NI*(XIJ + XJJ)); MKJJ.. MARKJJ =E= XJJ/(NJ*(XIJ + XJJ)); MKJI.. MARKJI =E= XJI/(NJ*(XII + XJI)); MODEL M54 /DXDI.PXDI, DXDJ.PXDJ, DXI.PXI, DXJ.PXJ, DY.PY, DWI.PUI, DWJ.PUJ, DFI.PFI, DFJ.PFJ, PRXDI.XI, PRXII.XII, PRXIJ.XIJ, PRXDJ.XJ, PRXJJ.XJJ, PRXJI.XJI, PRYI.YI, PRYJ.YJ, PRWI.WFI, PRWJ.WFJ, PRFI.NI, PRFJ.NJ, SKLABI.ZI, SKLABJ.ZJ, UNLABI.WI, UNLABJ.WJ, ICONSI.CONSI, ICONSJ.CONSJ, IENTREI.ENTI, IENTREJ.ENTJ, MKII.MARKII, MKIJ.MARKIJ, MKJJ.MARKJJ, MKJI.MARKJI/; OPTION MCP=MILES; OPTION LIMROW=0; OPTION LIMCOL=0; $OFFSYMLIST OFFSYMXREF OFFUELLIST OFFUELXREF CONSI.L = 200; CONSJ.L = 200; ENTI.L = 20; ENTJ.L = 20; XI.L = 1; XJ.L = 1; XII.L = 1; XIJ.L = 1; XJJ.L = 1; XJI.L = 1; YI.L = 1; YJ.L = 1; WFI.L = 1; WFJ.L = 1; NI.L = 2.5; NJ.L = 2.5; PXDI.L = 1; PXDJ.L = 1; PXI.L = 1.25; PXJ.L = 1.25; PY.L = 1; ZI.L = 1; ZJ.L = 1; WI.L = 1; WJ.L = 1; PUI.L = 1; PUJ.L = 1; PFI.L = 1; PFJ.L = 1; MARKII.L = 0.20; MARKIJ.L = 0.20; MARKJJ.L = 0.20; MARKJI.L = 0.20; PY.FX = 1; *M54.ITERLIM = 0; SOLVE M54 USING MCP; MODELSTAT = M54.MODELSTAT - 1.; * counterfactual: trade costs of 15% TC = 0.15; SOLVE M54 USING MCP; * counterfactual: home production subsidy of 10%, trade costs 0 TC = 0.; SUBSIDY = .10; SOLVE M54 USING MCP; * counterfactual: country's identical except for size, * positive trade costs (home market advantage) SUBSIDY = 0; TC = 0.15; ENDOWIL = 1.5; ENDOWJL = 0.5; ENDOWIS = 1.5; ENDOWJS = 0.5; SOLVE M54 USING MCP; REALWI = WI.L/PUI.L; REALWJ = WJ.L/PUJ.L; REALZI = ZI.L/PUI.L; REALZJ = ZJ.L/PUJ.L; DISPLAY REALWI, REALWJ, REALZI, REALZJ;