Hierarchical Trade and Endogenous Price Distortions
We study the allocation of commodities through a two-stage hierarchy of competitive markets. Groups or countries trade at global prices while individuals within a group trade at local prices. We identify the free trade and the autarky equilibrium as polar cases. We show that no other two-stage market equilibria exist if the commodity space is two-dimensional. An example demonstrates that other, so-called intermediate equilibria exist for three-dimensional commodity spaces. The example also exhibits endogenous price distortions in third countries when some countries follow distortionary trade policies. We give two existence proofs for intermediate equilibria in higher dimensions. Each proof provides an explicit construction of special classes of intermediate equilibria.
|Date of creation:||Sep 2007|
|Date of revision:|
|Contact details of provider:|| Postal: Zürichbergstrasse 18, ZUE, CH-8092 Zürich|
Phone: +41 44 632 03 87
Fax: +41 44 632 13 62
Web page: http://www.cer.ethz.ch
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Fukushima, Takashi & Kim, Namdoo, 1989. "Welfare improving tariff changes : A case of many goods and countries," Journal of International Economics, Elsevier, vol. 26(3-4), pages 383-388, May.
- Persson, Torsten & Tabellini, Guido, 1996. "Federal Fiscal Constitutions: Risk Sharing and Moral Hazard," Econometrica, Econometric Society, vol. 64(3), pages 623-46, May.
- Casella, Alessandra & Frey, Bruno, 1992. "Federalism and clubs : Towards an economic theory of overlapping political jurisdictions," European Economic Review, Elsevier, vol. 36(2-3), pages 639-646, April.
- Turunen-Red, Arja H & Woodland, Alan D, 1991. "Strict Pareto-Improving Multilateral Reforms of Tariffs," Econometrica, Econometric Society, vol. 59(4), pages 1127-52, July.
- Edward E. Leamer & James Levinsohn, 1994.
"International Trade Theory: The Evidence,"
NBER Working Papers
4940, National Bureau of Economic Research, Inc.
- Harry Flam, 1992. "Product Markets and 1992: Full Integration, Large Gains?," Journal of Economic Perspectives, American Economic Association, vol. 6(4), pages 7-30, Fall.
- Anderson, James E & Bannister, Geoffrey J & Neary, J Peter, 1995.
"Domestic Distortions and International Trade,"
International Economic Review,
Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 36(1), pages 139-57, February.
- Anderson, James E. & Neary, J. Peter, 1993. "Domestic distortions and international trade," Policy Research Working Paper Series 1163, The World Bank.
- J Anderson & J.P. Neary, 1993. "Domestic Distortions and International Trade," CEP Discussion Papers dp0179, Centre for Economic Performance, LSE.
- Anderson, James E & Neary, J Peter, 1993. "Domestic Distortions and International Trade," CEPR Discussion Papers 786, C.E.P.R. Discussion Papers.
- James E. Anderson & J. Peter Neary, 1992. "Domestic distortions and international trade," Working Papers 199217, School of Economics, University College Dublin.
- Hatta, Tatsuo & Fukushima, Takashi, 1979. "The welfare effect of tariff rate reductions in a many country world," Journal of International Economics, Elsevier, vol. 9(4), pages 503-511, November.
- Frank Verboven, 1996. "International Price Discrimination in the European Car Market," RAND Journal of Economics, The RAND Corporation, vol. 27(2), pages 240-268, Summer.
- Gersbach, Hans & Haller, Hans, 2010. "Hierarchical Trade," CEPR Discussion Papers 7764, C.E.P.R. Discussion Papers.
- Thorsten Hens, 1997. "Exchange rates and perfect competition," Journal of Economics, Springer, vol. 65(2), pages 151-161, June.
- Matthias Lutz, 2004. "Pricing in Segmented Markets, Arbitrage Barriers, and the Law of One Price: Evidence from the European Car Market," Review of International Economics, Wiley Blackwell, vol. 12(3), pages 456-475, 08.
- Ethier, Wilfred J., 1984. "Higher dimensional issues in trade theory," Handbook of International Economics, in: R. W. Jones & P. B. Kenen (ed.), Handbook of International Economics, edition 1, volume 1, chapter 3, pages 131-184 Elsevier.
- Haller, Hans & Holden, Steinar, 1997. "Ratification Requirement and Bargaining Power," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 38(4), pages 825-51, November.
When requesting a correction, please mention this item's handle: RePEc:eth:wpswif:07-72. 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: ()
If references are entirely missing, you can add them using this form.