[Econmaster2012] Research Seminar in Economics

[Frank Stähler]

Dear all,

the presenter in tomorrow's Research Seminar in Economics is Swati 
Dhingra, who is a Lecturer in Economics at the London School of 
Economics. The title of her talk will be

"Contracting and the Division of the Gains from Trade"

An abstract is enclosed below.

I am looking forward to seeing you tomorrow.

Best wishes,
Udo Kreickemeier

Abstract:

This paper examines the microstructure of import markets and the 
divisionof the gains from trade among consumers, importers and 
exporters. When exporters and importers transact through anonymous 
markets, double marginalization and business stealing among competing 
importers lead to lower profits. Trading parties can overcome these 
inefficiencies by investing in richer contractual arrangements such as 
bilateral contracts that eliminate double marginalization through fixed 
fees and joint contracts that internalize business stealing by 
maximizing joint profits of the exporter andits competing importers. 
Introducing these contractual choices into a trade model with 
heterogeneous exporters and importers, we show that trade liberalization 
increases the incentive to engage in joint contracts, thusraising the 
profits of exporters and importers at the expense of consumer welfare. 
We examine the implications of the model for prices, quantities and 
exporter-importer matches in Colombian import markets before and after 
the US-Colombia free trade agreement. US exporters that started to enjoy 
duty-free access were more likely to increase their average import 
price, decrease their quantity exported and reduce the number of import 
partners.