We discuss the endogenous selection of a costly allocation mechanism in a pure exchange economy. The allocation mechanism is modeled as an abstract trade center exhibiting setup costs, access costs and linear transaction costs. Exactly one trade center has to be selected. We define Pareto efficiency in this setting and decentralize decision making concerning consumption as well as the choice of a trade center through the concept of a separable valuation equilibrium. In this equilibrium concept trade centers are assigned individualized nonlinear prices.
|Number of pages||15|
|Publication status||Published - 1994|
|Name||CentER Discussion Paper|
- International Trade
- international economics