Market power in input purchase and trade |
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Authors: | Stephen Devadoss |
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Institution: | aDepartment of Agricultural Economics, University of Idaho, Moscow, ID 83844-2334, United States |
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Abstract: | Market power in the input purchase is becoming increasingly common because of growing consolidation and mergers and also due to multinational firms establishing a stronghold in buying inputs in the developing countries. In this study, we formulate a general equilibrium model consisting of a competitive sector and an oligopsony sector which exercises market power over inputs. Our results indicate that if the oligopsony sector incurs a higher marginal factor cost for the intensive factor, basic results of the standard two-sector model continue to hold. But if the marginal factor cost is higher for the non-intensive factor, then factor intensities in the physical and value sense differ and traditional trade propositions such as the Stolper–Samuelson theorem do not hold. |
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Keywords: | Oligopsony General equilibrium Trade theories |
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