International Trade, Bargaining and Efficiency: The Holdup Problem
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. Copyright 2000 by The editors of the Scandinavian Journal of Economics.
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Volume (Year): 102 (2000)
Issue (Month): 1 (March)
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