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Accommodating Imperfect Competition in A Model of World Peanut Trade

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  • Fletcher, Stanley M.
  • Nadolnyak, Denis A.
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    Abstract

    In this paper, we make an attempt to rationalize the strategic behavior of major peanut exporting and importing countries in the framework of imperfectly competitive markets with the focus on the global and inter-American peanut trade. This study is motivated by the fact that liberalizing imperfectly competitive and often distorted markets can have unorthodox effects, in particular increase the incentives to overuse certain trade policies. The results suggest that the South American peanut producers stand to benefit from the reductions in the U.S. peanut production supports but, paradoxically, preservation of a tariff may still be mutually welfare enhancing. In the broader context of global peanut trade, multi-lateral tariff reduction increases the low-cost exporters' incentives to subsidize export production, which benefits the consumers but hurts the higher-cost producers.

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    Bibliographic Info

    Paper provided by American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association) in its series 2005 Annual meeting, July 24-27, Providence, RI with number 19460.

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    Date of creation: 2005
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    Handle: RePEc:ags:aaea05:19460

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    Related research

    Keywords: trade; peanuts; strategic behavior; tariffs; TRQs; subsidies; International Relations/Trade;

    References

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    1. Krugman, Paul, 1980. "Scale Economies, Product Differentiation, and the Pattern of Trade," American Economic Review, American Economic Association, vol. 70(5), pages 950-59, December.
    2. Jonathan Eaton & Gene M. Grossman, 1983. "Optimal Trade and Industrial Policy Under Oligopoly," NBER Working Papers 1236, National Bureau of Economic Research, Inc.
    3. John C. Beghin & Holger Matthey, 2003. "Modeling World Peanut Product Markets: A Tool for Agricultural Trade Policy Analysis," Food and Agricultural Policy Research Institute (FAPRI) Publications 03-wp332, Food and Agricultural Policy Research Institute (FAPRI) at Iowa State University.
    4. Markusen, James R. & Venables, Anthony J., 1986. "Trade Policy with Increasing Returns and Imperfect Competition: Contradictory Results from Competing Assumptions," CEPR Discussion Papers 120, C.E.P.R. Discussion Papers.
    5. Diop, Ndiame & Beghin, John C. & Sewadah, Mirvat, 2005. "Groundnut Policies, Global Trade Dynamics, and the Impact of Trade Liberalization," Staff General Research Papers 12231, Iowa State University, Department of Economics.
    6. Bandyopadhyay, Subhayu, 1997. "Demand elasticities, asymmetry and strategic trade policy," Journal of International Economics, Elsevier, vol. 42(1-2), pages 167-177, February.
    7. Dixit, Avinash, 1984. "International Trade Policy for Oligopolistic Industries," Economic Journal, Royal Economic Society, vol. 94(376a), pages 1-16, Supplemen.
    8. Dixit, Avinash K, 1986. "Comparative Statics for Oligopoly," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 27(1), pages 107-22, February.
    9. Revoredo-Giha, Cesar & Fletcher, Stanley M., 2005. "Supplier reputation and price premium: the case of groundnuts in Rotterdam," Agricultural Economics Review, Greek Association of Agricultural Economists, vol. 6(2), August.
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