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Vulnerable trade: The dark side of an Edgeworth box

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  • Anderton, Charles H.
  • Carter, John R.

Abstract

We examine incentives to seize and defend goods offered for trade in an Edgeworth box economy. Appropriation possibilities generate equilibrium of coerced redistribution and voluntary trade in a reduced box. Potential mutual gains remain untaken because the prospect of piracy creates a price wedge, wherein the effective relative price is lowered for the exporter and raised for the importer. As the vulnerability of one or both goods increases, the price wedge widens, causing trade to diminish. If vulnerability becomes sufficiently high, then equilibrium with trade ceases to exist in the Edgeworth box economy.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Economic Behavior & Organization.

Volume (Year): 68 (2008)
Issue (Month): 2 (November)
Pages: 422-432

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Handle: RePEc:eee:jeborg:v:68:y:2008:i:2:p:422-432

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Web page: http://www.elsevier.com/locate/jebo

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Keywords: Appropriation Conflict Trade Piracy Edgeworth box;

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Cited by:
  1. Magnus Hoffmann, 2010. "Enforcement of property rights in a barter economy," Social Choice and Welfare, Springer, vol. 34(2), pages 249-263, February.
  2. Hoffmann, Magnus, 2006. "Enforcement of Property Rights in a Barter Economy," MPRA Paper 3260, University Library of Munich, Germany.
  3. A. Mantovi, 2014. "On luxury and equilibrium," Economics Department Working Papers 2014-EP02, Department of Economics, Parma University (Italy).

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