Friberg, Richard: Two Monies, Two Markets? Variability and the Option to Segment
World Conference Econometric Society, 2000, Seattle

Richard Friberg, Stockholm School of Economics
Two Monies, Two Markets? Variability and the Option to Segment
Session: C-5-16  Sunday 13 August 2000  by Friberg, Richard
This paper examines the decision to create barriers to arbitrage for a firm selling on two national markets. Sunk costs of market segmentationimply that the option to segment markets is more valuable the greater the variability of purchasing power between markets. One result is that a monetary union may lead to market integration when a fixed exchange rate did not. Extensions examine hysterisis, transport costs and general equilibrium modeling.


File created by Jurgen Doornik with eswc2000.ox on 2-01-2001