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- W1590848504 abstract "MY PURPOSE in this short note is to address a puzzle associated with customs-union theory, that of the welfare loss due to trade diversion.1 The puzzle takes the following form. When a country joins a customs union, individuals in that country find that a new option has been added to their trading possibilities. At the same time whatever opportunities for voluntary exchange that may have existed previously continue to remain available. Yet these same individuals may find themselves worse off subsequent to their country's joining the union. Hence the question: What is the source of failure in the individual or collective choice mechanism which can lead individuals' utility to decline when the feasible consumption set does not contract but new trading opportunities become available?2 The proposed answer is that welfare loss due to trade diversion constitutes another instance of a multiperson Prisoners' Dilemma.3 To provide the setting, consider Fig. 1, which depicts the familiar textbook two-good three-country Ricardian framework traditionally used to demonstrate the welfare loss due to trade diversion.4 The home economy," @default.
- W1590848504 created "2016-06-24" @default.
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- W1590848504 date "1989-01-01" @default.
- W1590848504 modified "2023-09-26" @default.
- W1590848504 title "RESOLVING THE PUZZLE OF WELFARE-REDUCING TRADE DIVERSION: A PRISONERS' DILEMMA INTERPRETATION" @default.
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- W1590848504 doi "https://doi.org/10.1093/oxfordjournals.oep.a041905" @default.
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