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Vulnerable Trade: The Dark Side of an Edgeworth Box

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Author Info

  • Charles Anderton

    ()
    (Department of Economics, College of the Holy Cross)

  • John Carter

    ()
    (Department of Economics, College of the Holy Cross)

Abstract

We examine incentives to seize and defend goods offered for trade in an Edgeworth box economy. Appropriation possibilities generate an 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 trade and appropriation are driven to zero, or one or both players are rendered indifferent to trade.

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File URL: http://college.holycross.edu/RePEc/hcx/Anderton_VulnerableTrade.pdf
File Function: Original paper written in July 2004
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Bibliographic Info

Paper provided by College of the Holy Cross, Department of Economics in its series Working Papers with number 0411.

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Length: 39 pages
Date of creation: Dec 2004
Date of revision:
Publication status: Published in Journal of Economic Behavior and Organization, November 2008, Vol. 68:2, pp. 422-432.
Handle: RePEc:hcx:wpaper:0411

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Keywords: appropriation; property rights; piracy; trade; edgeworth box;

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

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