Market Power, Uncertainty, and the Level of Trade
AbstractWe 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
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Bibliographic InfoPaper provided by Universitaet Bern, Departement Volkswirtschaft in its series Diskussionsschriften with number dp9309.
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- E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
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