International Trade in Intermediate and Final Goods: Some Welfare Implications of Destabilized Prices

International Trade with Fluctuating Prices

“…This may need elaboration. Let s and q be two random prices, both 5 For a discussion of the stock market model see Diamond [2]. Its adaption to the multigood price uncertainty problem has been considered by Riley [7].…”

“…If production conditions are such that the optimal allocation of resources requires concentration in an export whose price fluctuates, welfare will very likely diminish as compared with the fixed price case. Interestingly, social surplus analysis has been used by Hueth and Schmitz [5] to "prove" the opposite conclusion. Their error in deriving welfare implications from expected social surplus is instructive and the lesson is shown in Section 3.…”

Endogenous Price Policies and International Wheat Prices

“…The theoretical literature on price instability has focused on the international and domestic welfare implications of price stabilizing buffer stocks (Hueth and Schmitz;Just, Lutz, Schmitz, Tumovsky 1977 or effects of policies by trading countries with monopoly power (McCalla; Bieri and Schmitz; Alaouze, Watson, Sturgess; and Carter, Gallini, Schmitz). Recently, Bale and Lutz neatly summarized the theoretical, domestic, and international implications of various price policies.…”

Reviews on the Instability of World Primary Product Markets and Stabilization Policies

“…A more comprehensivc analysis was made by Hueth and Schmitz (1972) of the welfare implications of price stability in world trade under the same, framework employed by Massel. They argued that international price stabili-.…”