الگوهای ناکارآمد تجارت: تجارت مفرط، حمل متقاطع و دامپینگ

I study an example of a competitive environment in which trade occurs in a sequential manner. In this example, a country with a stable demand may suffer from trade with a country with unstable demand, there may be too much trade, a country may import and export the same good in the same period (cross-hauling) and dumping may occur. The timing of delivery is important. When delivery occurs before trade (delivery to stocks), trade improves welfare, there is dumping but no cross-hauling. When delivery occurs after trade (delivery to order), trade may reduce welfare and cross-hauling may occur.

Uncertainty about demand and supply conditions is an important feature of the environment. Yet the standard formulation of a competitive environment does not offer an explicit description of the resolution of uncertainty about market conditions. Instead we have a Walrasian auctioneer who resolves the uncertainty about supply and demand and announces the market clearing price before the beginning of actual trade. Monopolistic competition of the type pioneered by Dixit and Stiglitz (1977) is one possible remedy to this well-known problem. It has been widely used in the new Keynesian economics literature and in the international trade literature (see for example, Helpman and Krugman, 1985, Obstfeld and Rogoff, 1996 and Woodford, 2003). But for many problems the price-taking assumption is a useful abstraction. I therefore investigate here the Prescott (1975) “hotels” model, studied by, among others, Bryant (1980), Rotemberg and Summers (1990), Deneckere, Marvel and Peck (1996), Dana, 1998 and Dana, 1999 and Deneckere and Peck (2005). Here I use the flexible price version in Eden, 1990 and Eden, 2005 and Lucas and Woodford (1993). This version offers an explicit description of the resolution of uncertainty about market conditions and at the same time abstracts from monopoly power and strategic behavior. In the Prescott (1975) model a lower price promises a higher probability of making a sale and sellers are indifferent among all prices in the support of the equilibrium distribution. As a result the model determines the equilibrium price distribution but is silent about individual sellers' prices. Here I assume increasing marginal cost and take explicit account of transportation costs. This allows for sharp predictions about individual sellers' price offers and trade patterns. I focus on the issues of gains from international trade, dumping and cross-hauling. In the example analyzed, a stable demand country suffers from trade with an unstable demand country, there may be too much trade, a country may export and import the same good in the same period (cross-hauling) and a country may export at a price that is lower than the price it charges at home (dumping). The timing of delivery is important. When delivery occurs ex-ante before the arrival of buyers (delivery to stocks as in food items delivered to supermarkets) trade improves welfare, there is dumping but no cross-hauling. When delivery occurs ex-post (delivery to order as in Internet trading), trade may reduce welfare, cross-hauling may occur but dumping does not occur. In the delivery to stocks case, goods must be on display before the beginning of trade. Since the probability of making a sale is higher in the stable demand country, the price in the stable demand country is lower than the price in the unstable demand country and exporters from the unstable demand country may be accused of dumping. In the delivery to order case, buyers are treated symmetrically. In the high demand state some buyers from each country arrive early and buy at a cheap price and some arrive late and buy at a higher price. When sellers in the home country supply at the cheap price there will therefore be some export at the low price and some import at the high price (cross-hauling). Trade may reduce welfare in the stable demand country because in the high demand state buyers from the stable demand country may not be able to buy at the cheap price. In general, increasing the uncertainty about demand is “bad” because it leads to more price dispersion and lower average capacity utilization. A country with a relatively stable demand may therefore suffer from trade if as a result of trade there is more demand uncertainty. The model has elements in common with Newbery and Stiglitz (1984). In both models trade in a single good arises as a result of uncertainty about demand (or supply) and markets are incomplete. But there are important differences. In Newbery and Stiglitz there is a single market clearing price in each period and capacity is always fully utilized. In their model fluctuations in prices provide insurance to farmers against bad crops and are therefore “good” from the social point of view. Trade in their model may reduce welfare because it smoothes prices. In our model price dispersion is “bad” from the social point of view and trade may reduce welfare if it increases the dispersion in prices. The model is also related to the modern theory of cyclical dumping initiated by Ethier (1982). As in the peak-load-pricing model of Williamson (1966), the competitive price in Ethier's model is equal to the short run marginal cost when demand is low and capacity is not fully utilized. Ethier demonstrates that firms with high fixed cost due to labor contracts that promise secure employment may sell below average cost in downturns. In his model there is a single price that clears the international market (for steel in his example) and therefore the accusation of dumping will not be supported if the same period home price is used to define the “fair price”. In our model a seller may export at a lower price than the same period home price and therefore an accusation of dumping may be supported even when there are enough data to compute the same period home price. The analysis of dumping here is also different from the traditional price discrimination view because here sellers do not have monopoly power. Our model is also related to the Cournot type model considered by Brander (1981) and Brander and Krugman (1983). In their model there is a single firm in each country that delivers its output to two markets: the home and the foreign market. The firm takes the quantities delivered to the two markets by the other firm as given and chooses quantities to maximize profits. Cross-hauling and reciprocal dumping may occur and if transportation costs are high, trade may reduce welfare. In our model the environment is competitive and firms take prices as given. Cross-hauling in our model occurs only in the delivery to order case while the Brander and Krugman game suggests segmented markets and delivery to stocks.

In the standard Walrasian analysis of economies with uncertain demand, actual trade starts only after the uncertainty about demand is resolved and the auctioneer announces a price that guarantees the making of a sale. Here we studied the implication of a model that permits trade before the complete resolution of demand uncertainty and as a result making a sale is not guaranteed. Our model is competitive in the sense that sellers take the price that they can sell to each batch that does arrive as given and markets that open do clear. This model has been studied before but the application to international trade is, as far as I know, new. The application to international trade allows for a natural solution to the non-uniqueness problem in the Prescott type models. The Prescott model determines only the equilibrium distribution of prices and not the price charged by each seller. Here we solve this problem by assuming transportation costs and increasing marginal cost.9 It is shown that the time of delivery makes a difference. In the delivery to stocks case, we get dumping but no cross-hauling and no adverse welfare implications. Dumping occurs because the probability of making a sale in the exporting country is lower and therefore the price must be higher to yield the same expected revenues per unit. Delivery to stocks is prevalent in retail trade of final goods. But since much of international trade takes place in intermediate inputs, the delivery to order case is likely to be more relevant. In this case buyers are treated symmetrically. In the stable demand country buyers may suffer from trade because in the high demand state some of them will not be able to make a buy at the low price. Since sellers in country 1 also suffer from trade, all agents in country 1 suffer from trade. This is a surprising result. On an abstract level it has to do with incompleteness of markets. But here it comes with a story and a rather realistic “friction” that allow for trade before the complete resolution of uncertainty. As in many models of trade, reducing transportation costs reduces the difference between the marginal costs of the two sellers. But the results with respect to prices and trade patterns are not standard. One of the surprising results is that a decrease in transportation costs increases price dispersion. To understand this result we must distinguish between quoted prices and expected prices (expected revenues per unit). In our model the expected price is equal to the marginal cost and a decrease in transportation costs decreases the dispersion of expected prices. But the effect on quoted price, which do not take into account the probability of making a sale, is in the opposite direction. This occurs in both cases but the intuition is easier for the delivery to stocks case. When transportation costs decline the seller in country 2 move merchandise from the high price market in his country to the low price market in country 1. This increases the price in country 2 and reduces it in country 1. As a result the dispersion of quoted prices increases. Data used for computing the CPI are about quoted prices. Therefore our model may be useful for understanding some of the price puzzles in the literature. Cecchetti et al. (2002) examine the CPI inflation rate in 19 US cities from 1918 to 1995. They found that when looking at ten year periods, the average difference between the city with the highest and the lowest inflation rate does not change much between the 1920s and the 1990s. This is surprising because transportation costs went way down in this period. In our model the dispersion of quoted prices is caused by differences in demand uncertainty and reduction in transportation costs works in the direction of increasing it. Other factors like differences in technology may have worked to reduce the dispersion of quoted prices and therefore we may find no change in it. According to Crucini et al. (2005) “most economists believe that sticky prices, in their various forms, cannot account for the observed persistence in real exchange rates” (page 736, for other references on this issue see Frankel and Rose, 1996 and Rogoff, 1996). Using a model with equilibrium price dispersion may help because permanent shocks to taste may have permanent effect on prices. For example, a permanent change in taste that affects the probability of wanting to consume will have a permanent effect on the real exchange rate in our model.