Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/94745
Authors: 
Anderson, James E.
Marcouiller, S.J. Douglas
Year of Publication: 
1997
Series/Report no.: 
IUI Working Paper 477
Abstract: 
Market exchange is subject to an endogenously-determined level of predation which impedes specialization and gains from trade. Utility-maximizing agents opt between careers in specialized production and careers in predation. Three types of equilibria may emerge, autarky (with no predation and no defense), an insecure exchange equilibrium (with predation and defense), or a secure exchange equilibrium (in which defense completely deters predation). We analyze the influence of key parameters on the type of equilibrium which emerges. We also analyze changes in the welfare of groups of agents (the predators and specialized producers in both the richer region and the poorer region) as exogenous shocks occur in the technology of security. Since changes in security have terms of trade effects, some producers may be hurt by enhanced security. We show cases of 'immiserizing security' in which large poor countries are harmed by increased security.
Subjects: 
Trade
Economic Equilibrium
JEL: 
D58
F10
Document Type: 
Working Paper

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