Sensitivity analysis in an imperfect substitutes model of preferential trade

Purpose – The purpose of this paper is to develop a formal representation of the imperfect substitutes model (ISM) of partial equilibrium, trade policy analysis and to conduct sensitivity analysis on the behavioral parameters of the model. Design/methodology/approach – The paper develops an ISM in a manner that is conformable to more complex, applied general equilibrium models of trade policy analysis. Findings – The paper presents a set of sensitivity analyses on key behavioral parameters for a better understanding of the model's properties. Research limitations/implications – Sensitivity analysis on the values of behavioral parameters in ISMs needs to be conducted by trade policy modelers. Practical implications – The ISM is made more explicit here than in most representations, something that will be of great use to practitioners. Originality/value – While widely used in trade policy circles, the ISM is rarely explicitly formulated, nor the role of its behavioral parameters explored.