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Oligopsonistic Intermediate Input and Patterns of Trade

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  • Stephen Devadoss
  • Wongun Song

Abstract

We examine the validities of traditional trade theorems and patterns of trade for an economy with an oligopsonistic intermediate input. Specifically, the model consists of two final goods. one intermediate good, and two primary factors. One final good and the intermediate good are produced using primary factors, capital and labor. The second final good is produced using the intermediate good and labor. All markets operate under perfect competition except the intermediate good market, which is oligopsonistic. This model reflects the real world phenomena of oligopsony power excerted by some industries (e.g., the food processing industry) in the intermediate good purchases. Our analysis shows that some of the traditional trade theorems and H.O trade pattern may be overturned if the factor intensity of the competitive sector lies between those of oligopsony and intermediate good sectors. [F12]

Suggested Citation

  • Stephen Devadoss & Wongun Song, 2003. "Oligopsonistic Intermediate Input and Patterns of Trade," International Economic Journal, Taylor & Francis Journals, vol. 17(3), pages 77-97.
  • Handle: RePEc:taf:intecj:v:17:y:2003:i:3:p:77-97
    DOI: 10.1080/10168730300000005
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    References listed on IDEAS

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