We develop a simple two-country model of international trade that assumes that there is a fixed cost of doing international trade. We show that this leads to multiple equilibria that can be Pareto-ranked. We examine the stability properties of these equilibria.
Laussel, D. and Riezman, R. (2008), "Chapter 5 Fixed Transport Costs and International Trade", Marjit, S. and Yu, E.S.H. (Ed.) Contemporary and Emerging Issues in Trade Theory and Policy (Frontiers of Economics and Globalization, Vol. 4), Emerald Group Publishing Limited, Leeds, pp. 91-107. https://doi.org/10.1016/S1574-8715(08)04005-0
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