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Abstract
We study how the interplay between oligopoly in the transportation industry and oligopsony power retained by non-atomistic importers affects the transmission of trade policy. Using Chilean customs data, we document strong concentration among carriers and importers and show that freight prices are determined through bilateral bargaining under two-sided market power. We estimate a trade model that endogenizes transporta tion costs by embedding oligopoly and oligopsony in the transport sector, along with bilateral bargaining. We find sizable carrier markups, partially offset by importer bargain ing power. Embedding this mechanism into a quantitative trade model, we find that the endogenous response of transportation costs reduces the welfare cost of tariffs by 50% compared to the standard case of iceberg trade costs. This effect is primarily driven by decreasing returns to scale in carriers’ supply. Bargaining, in turn, plays a central role in shaping price levels and market allocations in the transportation sector.
Figure 1: Rejecting Uniform Pricing
Citation
Cristoforoni E., Errico M., Rodari F. and Edoardo Tolva. 2025. “Oligopolies in Trade and Transportation: Implications for the Gains from Trade.” Working Paper.
@article{UI13,
author = {Enrico Cristoforoni, Marco Errico, Federico Rodari, Edoardo Tolva},
year = {2025},
title ={Oligopolies in Trade and Transportation:
Implications for the Gains from Trade},
journal = {Working Paper},
volume = {},
number = {},
pages = {},
url = {}}