terms represent eastern imitation of northern products, southern imitation of eastern products and southern imitation of northern products respectively. and terms show the difficulty of imitation in eastern and southern regions; also known as intellectual property rights. Since northern region does not have any imitation process and this study does not focus on innovation processes, we did not define any IPR parameter for this region. Similarly with relative inefficiency difference between the northern and eastern innovation sectors, also in imitation equations an inefficiency parameter () has been defined. This assumption on southern imitation sectors is quite important to build a three-pole innovation-imitation system. Pricing and Profit Rates Now let us define the profit rates for each regions by calculating the following equation ; where , and are the profit rate, the price and the wage rate respectively. Notice that in this system labor is the only factor and one unit of labor produces one unit of output. First, the profits of northern and eastern innovators are calculated as below; , (11) , (12) Firstly, it is inevitable to remark that both the innovation and imitation type products are supplied to the global, without making any discrimination. Thus, the demanded quantity () is multiplied by the total population (). The assumption on the definition of the prices is based on Grossman and Helpman (1991) which assumes a wide wage gap between countries. According to this we can define the wage differentials as follows; and . The reason of choosing such an assumption is to be able to create a feasible condition for mark-up pricing for monopolies. Remember here that in this system all the innovators and imitators have
terms represent eastern imitation of northern products, southern imitation of eastern products and southern imitation of northern products respectively. and terms show the difficulty of imitation in eastern and southern regions; also known as intellectual property rights. Since northern region does not have any imitation process and this study does not focus on innovation processes, we did not define any IPR parameter for this region. Similarly with relative inefficiency difference between the northern and eastern innovation sectors, also in imitation equations an inefficiency parameter () has been defined. This assumption on southern imitation sectors is quite important to build a three-pole innovation-imitation system. Pricing and Profit Rates Now let us define the profit rates for each regions by calculating the following equation ; where , and are the profit rate, the price and the wage rate respectively. Notice that in this system labor is the only factor and one unit of labor produces one unit of output. First, the profits of northern and eastern innovators are calculated as below; , , (11) (12) Firstly, it is inevitable to remark that both the innovation and imitation type products are supplied to the global, without making any discrimination. Thus, the demanded quantity () is multiplied by the total population (). The assumption on the definition of the prices is based on Grossman and Helpman (1991) which assumes a wide wage gap between countries. According to this we can define the wage differentials as follows; and . The reason of choosing such an assumption is to be able to create a feasible condition for mark-up pricing for monopolies. Remember here that in this system all the innovators and imitators have
319c65f0406463d73f5192f2e5b4f057.docx