Abstract
Recent empirical research documented that there exists a nonlinear pricing phenomenon in the shipping industry. This paper strives to show how this empirical regularity would alter conventional results in trade literature. This paper also shows that when nonlinear pricing in the shipping industry is considered, while the average productivity is higher conducive to the higher welfare level, the gains from trade are generally lower than the situation without. In addition, the model built in this paper offers micro foundations for the additive trade cost and features an endogenous response of shipping charges to the iceberg trade cost, an empirical finding emphasized in Hummels et al. (2009). In a much broader sense, this paper argues that the heterogeneous firm model offers a lens through which traditional results on some interesting objects, for example, gains from trade, could be altered.
Sign-in/Register to access full text options 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
