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International Trade, Bargaining and Efficiency: The Holdup Problem
Author(s) -
Wes Marina
Publication year - 2000
Publication title -
scandinavian journal of economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.725
H-Index - 64
eISSN - 1467-9442
pISSN - 0347-0520
DOI - 10.1111/1467-9442.00189
Subject(s) - allocative efficiency , economics , upstream (networking) , monopoly , incentive , microeconomics , product market , productive efficiency , product (mathematics) , industrial organization , international economics , production (economics) , computer network , geometry , mathematics , computer science
In the presence of product market imperfections and holdup, we identify allocative and productive efficiency gains resulting from international trade. Under a bilateral monopoly in a closed economy, inefficiencies arise in both input and output markets. Trade in final goods has a procompetitive effect in the product market. This in turn triggers an increase in output, which raises incentives for the upstream firm to invest and helps reduce the hold‐up problem. JEL classification: F 12; F 13; F 15