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International Trade, Bargaining and Efficiency: The Holdup Problem

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  • Marina Wes

Abstract

In the presence of product market imperfections and holdup, we identify allocative and productive efficiency gains resulting from international trade. Under a bilateral monopoly in a closed economy, inefficiencies arise in both input and output markets. Trade in final goods has a procompetitive effect in the product market. This in turn triggers an increase in output, which raises incentives for the upstream firm to invest and helps reduce the hold‐up problem. JEL classification: F12; F13; F15

Suggested Citation

  • Marina Wes, 2000. "International Trade, Bargaining and Efficiency: The Holdup Problem," Scandinavian Journal of Economics, Wiley Blackwell, vol. 102(1), pages 151-162, March.
    • Handle: RePEc:bla:scandj:v:102:y:2000:i:1:p:151-162
    DOI: 10.1111/1467-9442.00189
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    Cited by:

    1. Aekapol Chongvilaivan & Jung Hur, 2012. "Trade Openness and Vertical Integration: Evidence from the U.S. Manufacturing Sector," Southern Economic Journal, John Wiley & Sons, vol. 78(4), pages 1242-1264, April.
    2. Pecorino, Paul, 2002. "Should the US allow prescription drug reimports from Canada?," Journal of Health Economics, Elsevier, vol. 21(4), pages 699-708, July.

    More about this item

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F15 - International Economics - - Trade - - - Economic Integration

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