Hub and Spoke Trade Agreements under Oligopoly with Asymmetric Costs

Halis Yildiz

MPRA Paper from University Library of Munich, Germany

Abstract: Using an oligopoly model of trade with asymmetric costs, we study the individual and world welfare implications of a hub and spoke trade agreement where the hub country is more efficient than spoke countries. Under a hub and spoke trade regime, the hub country can benefit at the expense of the spokes relative to free trade. Furthermore, if the hub is sufficiently efficient compared to the spokes, such a regime can yield higher global welfare than free trade. Preferential treatment of the efficient hub country in its export markets improves world welfare because it helps allocate a larger share of the world's output to a low cost location.

Keywords: oligopoly; hub and spoke trade agreements; global free trade (search for similar items in EconPapers)
JEL-codes: F12 F13 (search for similar items in EconPapers)
Date: 2012-02-07, Revised 2012-02-07
New Economics Papers: this item is included in nep-tre
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Related works:
Working Paper: Hub and spoke trade agreements under oligopoly with asymmetric costs (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:36501

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