Estimation of trade elasticities in the presence of trade barriers, multinationals and imperfect competition
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Recent research highlights the role that multinational trading companies may play in
impeding price transmission. In markets characterised by imperfect competition, an
estimate of the partial elasticity of demand may be of limited practical value if no
account is taken of the reaction of competitors. In this paper, we demonstrate the
potential for market structure to affect price transmission and trade elasticities, and
challenge the presumption that only government intervention can impact upon price
transmission, with examples supporting why theory would suggest otherwise.