IDEAS home Printed from
MyIDEAS: Log in (now much improved!) to save this article

Optimal design of trade institutions

Listed author(s):
  • Robert Gilles


  • Dimitrios Diamantaras


  • Pieter Ruys


We model an economy with social institutions that facilitate trade and induce three types of costs: establishment costs, access costs, and use costs. Use costs are specific transaction costs related to the use of these trade institutions. We assume that a trade institution is economically completely determined by the costs it imposes and by the effects on the trades it facilitates. We extend the Pareto efficiency concept to include various modes of organization of social institutions: the costs and benefits of these organizations are expressed in the trades they facilitate. Within this setting we discuss a valuation equilibrium concept, in which all agents use a common conjectural price system that assigns to every trade institution the price vector that would prevail under it. This feature of the equilibrium is important in securing the second welfare theorem, and is new to the analysis of economies with costly trade. Since the use costs can be nonlinear, there are non-convexities that prevent the second welfare theorem from obtaining in a finite economy, but we show it for large economies. Copyright Springer-Verlag Berlin/Heidelberg 2003

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL:
Download Restriction: Access to full text is restricted to subscribers.

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Article provided by Springer & Society for Economic Design in its journal Review Economic Design.

Volume (Year): 8 (2003)
Issue (Month): 3 (October)
Pages: 269-292

in new window

Handle: RePEc:spr:reecde:v:8:y:2003:i:3:p:269-292
DOI: 10.1007/s10058-003-0107-x
Contact details of provider: Web page:

Web page:

Order Information: Web:

No references listed on IDEAS
You can help add them by filling out this form.

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:spr:reecde:v:8:y:2003:i:3:p:269-292. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Sonal Shukla)

or (Rebekah McClure)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.