Estimation of trade elasticities in the presence of trade barriers, multinationals and imperfect competition

Abstract

Recent research highlights the role that multinational trading companies may play in impeding price transmission. In markets characterised by imperfect competition, an estimate of the partial elasticity of demand may be of limited practical value if no account is taken of the reaction of competitors. In this paper, we demonstrate the potential for market structure to affect price transmission and trade elasticities, and challenge the presumption that only government intervention can impact upon price transmission, with examples supporting why theory would suggest otherwise. © 2009 The Author Journal compilation © 2009 Australian Agricultural and Resource Economics Society Inc. and Blackwell Publishing Asia Pty Ltd.