The Structure and Performance of the World Market in a Cobb-Douglas Example
Working Paper No. 06-W23
Ben Zissimos
ABSTRACT [article]
In an international trading economy where countries set tariffs strategically, modeled using a Cobb-Douglas example, this paper studies
the relationship between the structure and the performance of the world
market. Using new results from monotone comparative statics in a
Shapley-Shubik market game, replication of such an international trading
economy is studied. It is shown that, as the economy is replicated, the
equilibrium converges monotonically towards the equilibrium of a
competitive equilibrium model of international trade. The distributional
implications of replication are also evaluated.
Keywords and Phrases: Efficiency, market structure, market game, tariff war,
welfare
JEL Classification Numbers: F02, F13, F15, C73