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Strategic Market Games and Ricardo

Author

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  • Waseem Toraubally

    (University of Manchester)

Abstract

We develop a Ricardian market game to show that in non-Walrasian economies, the Law of Comparative Advantage (LCA) Ã la Ricardo-Haberler (1817; 1936) can fail. Trade is driven, not by comparative advantages, but by strategic behaviour. This leads to a new and somewhat surprising result: it is shown in a Ricardian economy that at equilibrium, by both exporting and importing goods in which they have a comparative disadvantage, countries can Pareto improve on when they specialise as per the LCA, which in turn Pareto dominates autarky.

Suggested Citation

  • Waseem Toraubally, 2017. "Strategic Market Games and Ricardo," Economics Bulletin, AccessEcon, vol. 37(4), pages 2517-2525.
    • Handle: RePEc:ebl:ecbull:eb-17-00683
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    File URL: http://www.accessecon.com/Pubs/EB/2017/Volume37/EB-17-V37-I4-P224.pdf
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    Cited by:

    1. Toraubally, Waseem A., 2018. "Large market games, the law of one price, and market structure," Journal of Mathematical Economics, Elsevier, vol. 78(C), pages 13-26.
    2. Toraubally, Waseem A., 2023. "Comparative advantage with many goods: New treatment and results," European Journal of Operational Research, Elsevier, vol. 311(3), pages 1188-1201.

    More about this item

    Keywords

    Shapley-Shubik Market Games; Endogenous commodity-price formation; Comparative Advantage;
    All these keywords.

    JEL classification:

    • D5 - Microeconomics - - General Equilibrium and Disequilibrium
    • C7 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory

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