Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/224118 
Year of Publication: 
2019
Series/Report no.: 
Munich Discussion Paper No. 2019-1
Publisher: 
Ludwig-Maximilians-Universität München, Volkswirtschaftliche Fakultät, München
Abstract: 
This study examines how the rules of origin (RoO) of a free trade agreement (FTA) affect firms' pricing strategies. A value-added criterion (VAC) of the RoO requires firms to add more than a certain level of values within an FTA when firms use inputs originating from outside the FTA. The VAC may have a collusive effect that benefits all firms if it induces an offshoring firm to manipulate its output price. Meanwhile, a consumer-hurting FTA formation is possible even if all firms make tariff-free exports. Furthermore, such an FTA formation may worsen total welfare.
Subjects: 
Rules of origin
Free trade agreement
Pricing strategy
JEL: 
F13
F15
L11
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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