Taste Asymmetries and Trade Patterns

David Hennessy and Harvey Lapan

Economics Bulletin, 2003, vol. 4, issue 28, 1-14

Abstract: We study trade patterns in a pure exchange economy where preferences are symmetric up to taste intensity parameters. In a 2-person, 2-good endowment economy, then all endowments in a particular Edgeworth box rectangle require trading out of that rectangle. Under strictly quasi-concave preferences, trade will occur away from a larger area of initial endowments. The identified area is larger still when preferences are homothetic and identical up to taste intensity parameters. Implications for the factor price equalization theorem are explored.

Keywords: general; equilibrium (search for similar items in EconPapers)
JEL-codes: D5 F0 (search for similar items in EconPapers)
Date: 2003-06-16
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Working Paper: Taste Asymmetries and Trade Patterns (2002)
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