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HIERARCHICAL TRADE.
- Source :
- Economic Inquiry; Apr2018, Vol. 56 Issue 2, p1165-1184, 20p
- Publication Year :
- 2018
-
Abstract
- Commodity trading is typically organized hierarchically: Large‐scale trade takes place at the global price system while individuals trade at local price systems within their countries. Agencies or trading houses establish the link between these different market places. In this paper, we devise a framework to study this type of hierarchical trade. 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 <italic>intermediate</italic> equilibria exist for three‐dimensional commodity spaces. We then provide an explicit construction of special classes of intermediate equilibria. Moreover, we study the consequences when some countries control the agency that organizes trade at the global level and we analyze the role of international goods arbitrage. Finally, we show that profit‐maximizing agencies may not promote free trade outcomes. (<italic>JEL</italic> D43, D50, F10) [ABSTRACT FROM AUTHOR]
- Subjects :
- COMMERCE
FREE trade
RESOURCE allocation
DOMESTIC markets
RETAIL industry
Subjects
Details
- Language :
- English
- ISSN :
- 00952583
- Volume :
- 56
- Issue :
- 2
- Database :
- Complementary Index
- Journal :
- Economic Inquiry
- Publication Type :
- Academic Journal
- Accession number :
- 128133082
- Full Text :
- https://doi.org/10.1111/ecin.12513