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Integrated versus segmented markets: Implications for export pricing and welfare

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  • Raphael Becker
  • Sergey Nigai
  • Tobias Seidel

Abstract

This paper challenges the common assumption of perfect market segmentation in models based on monopolistic competition. We develop a tractable approach to analyze export entry and pricing decisions of firms and show that the trade costs triangle condition (absence of potential re‐exporting arbitrage) imposes constraints on firm‐level export prices, which have first‐order implications for trade and welfare. We provide empirical evidence that the triangle condition is violated in the data and quantify the importance of these violations in a general equilibrium setting.

Suggested Citation

  • Raphael Becker & Sergey Nigai & Tobias Seidel, 2023. "Integrated versus segmented markets: Implications for export pricing and welfare," Review of International Economics, Wiley Blackwell, vol. 31(4), pages 1199-1221, September.
    • Handle: RePEc:bla:reviec:v:31:y:2023:i:4:p:1199-1221
    DOI: 10.1111/roie.12660
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    More about this item

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F15 - International Economics - - Trade - - - Economic Integration

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