Title: The Theory of International Trade with an International Cartel or a Centrally Planned Economy
Abstract:Maintenance of an oil stockpile and the formation of a Federal corporation to import oil from the Organization of Petroleum Exporting Countries (OPEC) can be justified, because the country with the gr...Maintenance of an oil stockpile and the formation of a Federal corporation to import oil from the Organization of Petroleum Exporting Countries (OPEC) can be justified, because the country with the greatest economic ''muscle'' can impose its own terms on trading partners. Conclusions reached by applying the standard tools of trade theory to decision-making in a centralized economy (e.g., OPEC) are that: (1) the central planner acts like individuals in a decentralized economy if there is no monopoly; (2) if there is a monopoly and trade occurs with a market economy (e.g., U.S.), the central planner's position is undefined, and the best policy for a market economy is not clear; and (3) if trade is with another central economy, trade terms are settled through bilateral bargaining by the central planners. Thus, in order to keep the central planner from exploiting this country's monopoly power, the market economy should act as a central planner. Considering the oil situation, perhaps the U.S. should trade with OPEC at the state level rather than allowing individual firms to make trade deals. These observations can be extended to other vital resources, which may be subject to future cartels. (8 references) (DCK)Read More
Publication Year: 1976
Publication Date: 1976-01-01
Language: en
Type: article
Indexed In: ['crossref']
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Cited By Count: 6
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