Strategic Market Games and Ricardo

Waseem Toraubally ()
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Waseem Toraubally: University of Manchester

Economics Bulletin, 2017, vol. 37, issue 4, 2517-2525

Abstract: We develop a Ricardian market game to show that in non-Walrasian economies, the Law of Comparative Advantage (LCA) Ã la Ricardo-Haberler (1817; 1936) can fail. Trade is driven, not by comparative advantages, but by strategic behaviour. This leads to a new and somewhat surprising result: it is shown in a Ricardian economy that at equilibrium, by both exporting and importing goods in which they have a comparative disadvantage, countries can Pareto improve on when they specialise as per the LCA, which in turn Pareto dominates autarky.

Keywords: Shapley-Shubik Market Games, Endogenous commodity-price formation, Comparative Advantage (search for similar items in EconPapers)
JEL-codes: C7 D5 (search for similar items in EconPapers)
Date: 2017-11-19
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Citations: View citations in EconPapers (2)

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