IDEAS home Printed from
MyIDEAS: Login to save this paper or follow this series

An Oligopolistic Theory of Regional Trade Agreements

  • Soegaard, Christian

    (Department of Economics, University of Warwick,)

Why are trade agreements regional? I address this question in a model of oligopoly featuring product variety. Tariffs have the effect of manipulating a country's terms of trade and shifting profits towards the domestic market at the expense of foreign trade partners. Countries endogenously form into regional trade agreements or global free trade in a framework where any agreement must be sustained by repeated interaction. A crucial parameter determining the degree of regionalism is product variety. I demonstrate that for a given trade cost and discount factor, increases in product variety leads to greater scope for global free trade relative to regional trade agreements. JEL codes: F13 ; F15.

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: no

Paper provided by University of Warwick, Department of Economics in its series The Warwick Economics Research Paper Series (TWERPS) with number 1007.

in new window

Date of creation: 2013
Date of revision:
Handle: RePEc:wrk:warwec:1007
Contact details of provider: Postal: CV4 7AL COVENTRY
Phone: +44 (0) 2476 523202
Fax: +44 (0) 2476 523032
Web page:

More information through EDIRC

References listed on IDEAS
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.:

as in new window
  1. Kamal Saggi, 2006. "Preferential Trade Agreements And Multilateral Tariff Cooperation ," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 47(1), pages 29-57, 02.
  2. Caroline Freund & Emanuel Ornelas, 2010. "Regional trade agreements: blessing or burden?," CentrePiece - The Magazine for Economic Performance 313, Centre for Economic Performance, LSE.
  3. Limão, Nuno & Saggi, Kamal, 2008. "Tariff retaliation versus financial compensation in the enforcement of international trade agreements," Journal of International Economics, Elsevier, vol. 76(1), pages 48-60, September.
  4. James Brander & Paul Krugman, 1980. "A "Reciprocal Dumping" Model of International Trade," Working Papers 405, Queen's University, Department of Economics.
  5. Caroline Freund, 2010. "Third‐country Effects of Regional Trade Agreements," The World Economy, Wiley Blackwell, vol. 33(11), pages 1589-1605, November.
  6. Kyle Bagwell & Robert W. Staiger, 1993. "Multilateral Tariff Cooperation during the Formation of Customs Unions," NBER Working Papers 4543, National Bureau of Economic Research, Inc.
  7. Monika Mrazova, 2009. "Trade negotiations when market access matters," Economics Series Working Papers 447, University of Oxford, Department of Economics.
  8. Caroline Freund & Emanuel Ornelas, 2009. "Regional trade agreements," LSE Research Online Documents on Economics 28697, London School of Economics and Political Science, LSE Library.
  9. Egger, Peter & Larch, Mario, 2008. "Interdependent preferential trade agreement memberships: An empirical analysis," Journal of International Economics, Elsevier, vol. 76(2), pages 384-399, December.
  10. Collie, David, 1993. "Profit-Shifting Export Subsidies and the Sustainability of Free Trade," Scottish Journal of Political Economy, Scottish Economic Society, vol. 40(4), pages 408-19, November.
  11. James Brander, 1980. "Intra-Industry Trade in Identical Commodities," Working Papers 380, Queen's University, Department of Economics.
  12. Kyle Bagwell & Robert W. Staiger, 1993. "Multilateral Tariff Cooperation During the Formation of Free Trade Areas," Discussion Papers 1048, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  13. Ben Zissimos, 2011. "Why are Trade Agreements Regional?," Review of International Economics, Wiley Blackwell, vol. 19(1), pages 32-45, 02.
  14. Paul R. Krugman, 1991. "The move toward free trade zones," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, pages 7-58.
  15. Baier, Scott L. & Bergstrand, Jeffrey H., 2004. "Economic determinants of free trade agreements," Journal of International Economics, Elsevier, vol. 64(1), pages 29-63, October.
  16. Kyle Bagwell & Robert W. Staiger, 2010. "The World Trade Organization: Theory and Practice," Annual Review of Economics, Annual Reviews, vol. 2(1), pages 223-256, 09.
  17. Bond, Eric W & Syropoulos, Costas & Winters, L. Alan, 2000. "Deepening of Regional Integration and Multilateral Trade Agreements," CEPR Discussion Papers 2480, C.E.P.R. Discussion Papers.
  18. Sang-Seung, Yi, 1996. "Endogenous formation of customs unions under imperfect competition: open regionalism is good," Journal of International Economics, Elsevier, vol. 41(1-2), pages 153-177, August.
  19. Ludema, Rodney D., 2002. "Increasing returns, multinationals and geography of preferential trade agreements," Journal of International Economics, Elsevier, vol. 56(2), pages 329-358, March.
Full references (including those not matched with items on IDEAS)

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:wrk:warwec:1007. 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: (Helen Neal)

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.