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Market power, uncertainty, and the level of trade

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  • Winand Emons

Abstract

We consider a set of home firms, each of which has a stochastic requirement for a particular input. High-cost home firms can produce the input themselves. Low-cost foreign firms produce the input to sell it to home firms through an international market. Efficiency requires the input to be produced by foreign firms and traded in the market. Yet, home firms will always engage in inefficient home production. By producing some of its own input needs, a home firm cuts down on aggregate input demand, thus depressing prices in the market. Copyright Kluwer Academic Publishers 1994

Suggested Citation

  • Winand Emons, 1994. "Market power, uncertainty, and the level of trade," Open Economies Review, Springer, vol. 5(3), pages 261-274, July.
    • Handle: RePEc:kap:openec:v:5:y:1994:i:3:p:261-274
    DOI: 10.1007/BF01000912
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    References listed on IDEAS

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    Cited by:

    1. Emons, Winand, 1996. "Good times, bad times, and vertical upstream integration," International Journal of Industrial Organization, Elsevier, vol. 14(4), pages 465-484, June.

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