Some Economics of Integrated and Segmented Markets
نویسنده
چکیده
In this paper, whether markets are integrated or segmented is endogenous and is determined by the interaction of demand parameters, tariffs, transportation costs, and arbitrage. Given certain restrictions, it is shown, in equilibrium, that policy makers choose tariffs to segment markets. The effects of trade liberalization (reducing all tariffs to zero) in an endogenous market structure framework are determined and compared to the existing literature. The results differ substantially highlighting the importance of explicitly modelling costly arbitrage in imperfectly competitive models. JEL Classification: F12, F15
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