Soegaard, Chrisitian (2013) An oligopolistic theory of regional trade agreements. Working Paper. Coventry, UK: University of Warwick, Department of Economics. Warwick economics research papers series (TWERPS), Volume 2013 (Number 1007).

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Abstract

Why are trade agreements regional? I address this question in a model of oligopoly featuring
product variety. Tarifs have the effect of manipulating a country's terms of trade and shifting profits
towards the domestic market at the expense of foreign trade partners. Countries endogenously form
into regional trade agreements or global free trade in a framework where any agreement must be
sustained by repeated interaction. A crucial parameter determining the degree of regionalism is
product variety. I demonstrate that for a given trade cost and discount factor, increases in product
variety leads to greater scope for global free trade relative to regional trade agreements.

Item Type:	Working or Discussion Paper (Working Paper)
Subjects:	H Social Sciences > HB Economic Theory
Divisions:	Faculty of Social Sciences > Economics
Library of Congress Subject Headings (LCSH):	Economics -- Mathematical models , Commercial treaties, Commercial policy
Series Name:	Warwick economics research papers series (TWERPS)
Publisher:	University of Warwick, Department of Economics
Place of Publication:	Coventry, UK
Official Date:	30 March 2013
Dates:	Date Event 30 March 2013 Published
Volume:	Volume 2013
Number:	Number 1007
Number of Pages:	45
Status:	Not Peer Reviewed
Access rights to Published version:	Open Access

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