TRADE WITH AND WITHOUT INTERMEDIARIES - SOME ALTERNATIVE MODEL FORMULATIONS

Interregional and international trade models have conventionally used an abstract exchange mechanism to generate the linkages between exogen ous supply and demand functions defined in each region (country). This approach is compared with a procedure where spatial non-separable sup ply or demand functions for the agents who pay the transport costs are derived endogenously and the exchange mechanism eliminated. In both c ases, trade is generated through direct bilateral contracts between bu yers and sellers. However, differentiated finished goods are often tra ded with the active intervention of intermediaries, acting as both buy ers and sellers. In such cases, an actual exchange mechanism is introd uced to represent the price responsive behaviour of the exchange agent s. The structures of the alternative models are compared with regard t o their equilibrium properties and potential policy applications, for both mill pricing and uniform delivered pricing.