The Economics of Reciprocity: Theory and Evidence on Bilateral Trading Arrangements

Abstract

Most modern research on the theory of price discrimination in general equilibrium has sprung from the interest of countries in forming customs unions or free-trade areas. Yet these two forms of integration far from exhaust the kinds of preferential agreements that are observed in real life. The theorists have been conscious that their analyses potentially apply to a much wider set of arrangements — witness the titles of the two leading contemporary treatises [18], [38]. But they have not used their apparatus to explore all the positive and normative questions raised by some of these other types of discriminatory arrangements. Nor, perforce, has the general-equilibrium theory of discrimination been applied to these questions in practice. These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.

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