NetLogo User Community Models
WHAT IS IT?
This is a model of international Trade. It explains how incertitude, trade relations and different modes of export interact with each other. Exporters face incertitude, have to pay a sunk search cost and a fixed link-cost to maintain the relationship. Exporters will then endogenously choose different export modes. The different possibilities of export in the model are direct trade, trade through a general importer or installing a foreign distribution center. Trade evolves through consumers' love of variety.
HOW IT WORKS
The economy consists of two countries, left and right. Producers are different in productivity and have to search costly for a distributor to set up a trade relationship. Both, producers and distributors pay a link cost in order to maintain the trade relationship. Trade emerges because the consumers’ utility increases, when they can consume more different products (love for variety).
Because producers do not know their relative productivity, they have to make experience and overcome uncertainty about their competitiveness. If they are certain to be competitive, they will try to make business in the foreign country, while they have to pay a trade cost. But also the search cost and the cost to maintain a relationship increase for the foreign country.
When producers are certain to be competitive in the foreign country, they will install a foreign distributor center (FDC).
Distributors will make offers to foreign producers to supply them as a general importer (GI). This means, that the distributor, as a GI, imports goods and resells them to other local distributors.
For more detailed information about the model please contact me.
THINGS TO NOTICE
The model is able to replicate several facts which were discovered in recent empiric analysis on international trade:
HOW TO USE IT
- anzcons, anzprod is the number of consumers and producers in each country.
THINGS TO TRY
By increasing the fix cost of a firm, fewer firms are able to stay on the market. This decreases competition and has also an influence on the mean productivity and the decomposition of the trade modes.
CREDITS AND REFERENCES
This model was built by Pascal Bürki. For more information you can contact me on email@example.com
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