Home Bias, internationale Preisdifferenzierung und Wirtschaftsintegration
AbstractThis paper studies the effects of a further integration of markets that are characterized by intra-industry trade. The analysis is motivated by the observation that product markets of EU countries are more segmented than is usually supposed, which becomes evident e.g. from high differences in prices for identical products. We consider a duopoly model with a home bias in demand that creates an incentive for price discrimination. The effects of reducing trade barriers depend on whether primarily trade costs born by exporting firms decrease or whether arbitrage is enhanced. A fall in arbitrage costs raises the export price, lowers the volume of trade and may result in a reduction of total quantity. Decreasing trade costs reduce prices and expand intra-industry trade; however, the exact effects depend on whether arbitrage constitutes a binding restriction for setting prices. Finally, even measures that equally reduce trade and arbitrage costs may lower the volume of trade.
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Bibliographic InfoArticle provided by Justus-Liebig University Giessen, Department of Statistics and Economics in its journal Journal of Economics and Statistics.
Volume (Year): 222 (2002)
Issue (Month): 1 ()
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International price discrimination; intra-industry trade; segmented markets; economic integration;
Find related papers by JEL classification:
- F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
- F15 - International Economics - - Trade - - - Economic Integration
- L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
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