Decentralized international exchange

Robert Reed () and Kathleen Trask

Canadian Journal of Economics, 2006, vol. 39, issue 2, 516-543

Abstract: We utilize a random-matching model to examine the relationships between market frictions and international trade. In our setting, an individual may choose to search abroad where she may have a cost advantage, but is less likely to meet potential trading partners, owing to higher market frictions. Interestingly, we find that international trade may be associated with lower welfare than autarky. We show how this is due to price distortions resulting from bargaining when there are opportunities for exchange across countries.

JEL-codes: C78 D83 F10 (search for similar items in EconPapers)
Date: 2006
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