IS FOREIGN TRADE (IM)PERFECTLY COMPETITIVE?: AN ANALYSIS OF THE GERMAN MARKET FOR BANANA IMPORTS

Satish Y. Deodhar and Ian Sheldon

Journal of Agricultural Economics, 1995, vol. 46, issue 3, 336-348

Abstract: Many studies have been carried out that measure welfare effects of the newly adoped common policy on banana imports by the European Union. All these studies assume that foreign trade in bananas is characterised by perfectly competitive behaviour. However, if foreign trade in bananas is imperfectly competitive, then the welfare predictions about the common banana policy may turn out to be incorrect. It is necessary, therefore, to empirically estimate the degree of market imperfection in the banana market. In this paper, we estimate the degree of market imperfection in the German market for banana imports using a structural econometric model. Based on the bootstrap procedure, we reject the hypothesis that firms in this market behave perfectly competitively, but cannot reject the hypothesis that firms are engaged in Cournot‐Nash behaviour.

Date: 1995
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