Taste Asymmetries and Trade Patterns
Date
2003
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Economics Bulletin
Abstract
We study trade patterns in a pure exchange economy where preferences are symmetric up to taste intensity parameters. In a 2−person, 2−good endowment economy, then all endowments
in a particular Edgeworth box rectangle require trading out of that rectangle. Under strictly quasi−concave preferences, trade will occur away from a larger area of initial endowments. The identified area is larger still when preferences are homothetic and identical up to taste intensity parameters. Implications for the factor price equalization theorem are explored.
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JEL Classification: D5
This article is published as David A. Hennessy and Harvey E. Lapan, (2003) ''Taste Asymmetries and Trade Patterns'', Economics Bulletin, Vol. 4 no.28 pp. 1-14. Copyright 2003 Economics Bulletin. Posted with permission.
This article is published as David A. Hennessy and Harvey E. Lapan, (2003) ''Taste Asymmetries and Trade Patterns'', Economics Bulletin, Vol. 4 no.28 pp. 1-14. Copyright 2003 Economics Bulletin. Posted with permission.