A Search Cost Perspective on Formation and Duration of Trade

15 Pages Posted: 3 Nov 2008

See all articles by Tibor Besedes

Tibor Besedes

Georgia Institute of Technology

Abstract

More than half of all US import relationships begin with less than $10,000 annually. The median relationship is observed to last just one year. The incidence and duration of import relationships are consistent with a search model of international trade. The preponderance of small starting relationships reveals uncertainty present in the formation of trade relationships. Initial size, reliability, and search costs play an important role. Larger initial purchase results in longer relationships. Higher reliability and lower search costs lead to larger initial purchases and longer relationships.

Suggested Citation

Besedes, Tibor, A Search Cost Perspective on Formation and Duration of Trade. Review of International Economics, Vol. 16, Issue 5, pp. 835-849, November 2008, Available at SSRN: https://ssrn.com/abstract=1292031 or http://dx.doi.org/10.1111/j.1467-9396.2008.00752.x

Tibor Besedes (Contact Author)

Georgia Institute of Technology ( email )

221 Bobby Dodd Way
Atlanta, GA 30332-0615
United States

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