Producer behavior with rules of origin.

This paper presents a model of a free trade area that incorporates rules of origin and analyzes their implications for the structure of producers' supply correspondences. In our model, producers decide whether or not to comply with rules of origin to avoid paying tariffs to export to other free trade area members and, as prices change, producers can switch from production plans that satisfy rules of origin to production plans that do not. We show that rules of origin can produce discontinuities in the supply correspondence of firms that have to be taken into account when doing policy analysis. [ABSTRACT FROM AUTHOR]