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Generalized separability and the gains from trade

Author:
Fally, Thibault
Source:
Economics letters 2019 v.178 pp. 8-12
ISSN:
0165-1765
Subject:
income, monopoly, prediction, prices, trade
Abstract:
This note examines the gains from trade under a flexible demand system that encompasses three types of demand often imposed (cases of homothetic, directly-separable and indirectly-separable preferences), while retaining the property that prices can be summarized by a single aggregator. Combined with monopolistic competition and Pareto distributions of marginal costs on the supply side, this demand system yields more flexible responses of prices to income and trade, and a wider range of predictions for the gains from trade.
Agid:
6345934