International Trade, Bargaining and Efficiency: The Holdup Problem

Posted: 5 Feb 2001

See all articles by Marina Wes

Marina Wes

European Bank for Reconstruction and Development (EBRD)

Abstract

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: F12, F13, F15

Suggested Citation

Wes, Marina, International Trade, Bargaining and Efficiency: The Holdup Problem. Available at SSRN: https://ssrn.com/abstract=234986

Marina Wes (Contact Author)

European Bank for Reconstruction and Development (EBRD) ( email )

One Exchange Square
London, EC2A 2EH
United Kingdom

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