ABSTRACT
This paper provides an investigation of the potential welfare and employment effects of Europe's move to a single market, using a state-of-the-art large-scale applied general equilibrium model of trade and production. The model is intertemporal, multicountry and multisectoral. Increasing returns to scale are introduced in some production activities, with firms behaving as oligopolies. There is, furthermore, product differentiation at the individual producer level. Competition is either of Bertrand or of Cournot type: the oligopolistic game between firms is Nash in prices or in output. 1 In the short run, the market structure is fixed (i.e. the number of oligopolists remains constant) and imperfections such as oligopolistic profits and wage rigidities may exist. These imperfections vanish in the long run, the last period being characterized by stock-flow equilibrium consistent with steady-state growth and Chamberlinian entry and exit of firms in the industry.
