How does non-market economy structure work as a trade barrier?

Abstract

ABSTRACT This study investigates the effect of a non-market economy structure on the duopoly competition in which a foreign private firm competes with a state-owned enterprise in a non-market economy. By comparing with Singh and Vives (1984) and Matsumura and Ogawa (2012), we find that the non-market economic structure can function as a trade barrier and cause foreign firms to face discriminatory competition. The transition from a non-market economy to a market economy may sacrifice social welfare, which implies no more Pareto improvement.