THE PATTERN OF TRADE AND THE GAINS FROM TRADE IN THE PRESENCE OF DOMESTIC MONOPSONY

The paper investigates the allocation and welfare effects of free trade when the domestic market for a tradable commodity is monopsonistic. It is shown that where such a market imperfection constitutes the basis for trade, the resulting pattern of trade and gains from trade depend on whether the monopsonist is able to price discriminate. In other cases, it is shown that monopsony may reverse the pattern of trade that would be observed under competitive conditions and that while free trade may be immiserizing, such a result is unlikely in the absence of price discrimination. © 1990.