Strategic Market Games and Ricardo

Waseem Toraubally

Strategic Market Games and Ricardo

Waseem Toraubally

School of Economics, Finance and Accounting

Research output: Contribution to journal › Article › peer-review

1 Citation (Scopus)

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Abstract

We develop a Ricardian market game to show that in non-Walrasian economies, the Law of Comparative Advantage (LCA) à la Ricardo-Haberler (1817; 1936) can fail. Trade is driven, not by comparative advantages, but by strategic behaviour. This leads to a new and somewhat surprising result: it is shown in a Ricardian economy that at equilibrium, by both exporting and importing goods in which they have a comparative disadvantage, countries can Pareto improve on when they specialise as per the LCA, which in turn Pareto dominates autarky.

Original language	English
Journal	Economics Bulletin
Volume	37
Issue number	4
Publication status	Published - 19 Nov 2017

Bibliographical note

The Economic Bulletin is an open-access letters journal.

Keywords

Shapley-Shubik Market Games
Endogenous commodity-price formation
Comparative Advantage
JEL: D5 - General Equilibrium and Disequilibrium: General
C7 - Game Theory and Bargaining Theory:General

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http://www.accessecon.com/Pubs/EB/2017/Volume37/EB-17-V37-I4-P224.pdf

Cite this

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title = "Strategic Market Games and Ricardo",

abstract = "We develop a Ricardian market game to show that in non-Walrasian economies, the Law of Comparative Advantage (LCA) {\`a} la Ricardo-Haberler (1817; 1936) can fail. Trade is driven, not by comparative advantages, but by strategic behaviour. This leads to a new and somewhat surprising result: it is shown in a Ricardian economy that at equilibrium, by both exporting and importing goods in which they have a comparative disadvantage, countries can Pareto improve on when they specialise as per the LCA, which in turn Pareto dominates autarky.",

keywords = "Shapley-Shubik Market Games, Endogenous commodity-price formation, Comparative Advantage, JEL: D5 - General Equilibrium and Disequilibrium: General, C7 - Game Theory and Bargaining Theory:General",

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year = "2017",

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volume = "37",

journal = "Economics Bulletin",

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AU - Toraubally, Waseem

N1 - The Economic Bulletin is an open-access letters journal.

PY - 2017/11/19

Y1 - 2017/11/19

N2 - We develop a Ricardian market game to show that in non-Walrasian economies, the Law of Comparative Advantage (LCA) à la Ricardo-Haberler (1817; 1936) can fail. Trade is driven, not by comparative advantages, but by strategic behaviour. This leads to a new and somewhat surprising result: it is shown in a Ricardian economy that at equilibrium, by both exporting and importing goods in which they have a comparative disadvantage, countries can Pareto improve on when they specialise as per the LCA, which in turn Pareto dominates autarky.

AB - We develop a Ricardian market game to show that in non-Walrasian economies, the Law of Comparative Advantage (LCA) à la Ricardo-Haberler (1817; 1936) can fail. Trade is driven, not by comparative advantages, but by strategic behaviour. This leads to a new and somewhat surprising result: it is shown in a Ricardian economy that at equilibrium, by both exporting and importing goods in which they have a comparative disadvantage, countries can Pareto improve on when they specialise as per the LCA, which in turn Pareto dominates autarky.

KW - Shapley-Shubik Market Games

KW - Endogenous commodity-price formation

KW - Comparative Advantage

KW - JEL: D5 - General Equilibrium and Disequilibrium: General

KW - C7 - Game Theory and Bargaining Theory:General

M3 - Article

SN - 1545-2921

VL - 37

JO - Economics Bulletin

JF - Economics Bulletin

IS - 4

ER -

Strategic Market Games and Ricardo

Abstract

Bibliographical note

Keywords

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