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Buying Locally

Author

Listed:
  • George J. Mailath
  • Andrew Postlewaite
  • Larry Samuelson

Abstract

‘‘Buy local” arrangements encourage members of a community or group to patronize one another instead of the external economy. They range from formal mechanisms such as local currencies to informal “I'll buy from you if you buy from me” arrangements and are often championed on social or environmental grounds. We show that in a monopolistically competitive economy, buy local arrangements can have salutary effects even for selfish agents immune to social or environmental considerations. Buy local arrangements effectively allow firms to exploit the equilibrium price–cost gap to profitably expand their sales at the going price.

Suggested Citation

  • George J. Mailath & Andrew Postlewaite & Larry Samuelson, 2016. "Buying Locally," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 57(4), pages 1179-1200, November.
    • Handle: RePEc:wly:iecrev:v:57:y:2016:i:4:p:1179-1200
    DOI: 10.1111/iere.12194
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    References listed on IDEAS

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    Full references (including those not matched with items on IDEAS)

    Citations

    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. 'Buying Locally'
      by Mark Thoma in Economist's View on 2015-08-06 17:29:29
    2. “Buying Locally,” G. J. Mailath, A. Postlewaite & L. Samuelson (2015)
      by afinetheorem in A Fine Theorem on 2015-08-07 00:11:55

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    More about this item

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • D85 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Network Formation
    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)

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