TY  - JOUR
AU  - Abrego,Lisandro
AU  - Riezman,Raymond
AU  - Whalley,John
TI  - How Reasonable Are Assumptions Used in Theoretical Models?: Computational Evidence on the Likelihood of Trade Pattern Changes
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 8169
PY  - 2001
Y2  - March 2001
UR  - http://www.nber.org/papers/w8169
L1  - http://www.nber.org/papers/w8169.pdf
N1  - Author contact info:
Raymond G.. Riezman
Department of Economics  
Henry B. Tippie College of Business
W360 PBB  
University of Iowa 
Iowa City, IA 52242-1000 
E-Mail: raymond-riezman@uiowa.edu

John Whalley
Department of Economics
Social Science Centre
University of Western Ontario
London, ON N6A 5C2
CANADA
Tel: 519/661-3509
Fax: 519/661-3666
E-Mail: jwhalley@uwo.ca
AB  - This paper seeks to contribute to discussion of the reasonableness of sometimes seemingly innocent assumptions used in theoretical trade models that the direction of trade is both predetermined for each good for each country and fixed.  Here, we provide computational evidence as to the reasonableness of this assumption.  We consider a simple three-country, three-good, pure-exchange model with CES preferences.  We compute free trade competitive equilibria, three-country non-cooperative Nash equilibria, and customs union equilibria for randomized parameterizations, and find that trade patterns change in around 35% of the cases between free trade and customs union equilibria. In three-country Nash and customs unions comparisons trade patterns change roughly 40% of the time.  We evaluate alternative cases, including with different numbers of randomizations in the parameter space.  Results remain robust, reinforcing our conclusion that the assumption of unchanged trade pattern changes, common in theoretical analysis, does not have firm numerical support in the cases we consider.
ER  -