International trade and cultural diversity with preference selection

We consider the evolution of preferences when trade occurs between two countries. We show that if one country is much larger than the other, the preferences of the large country can take over the preferences of the small country. This may explain why some small countries exclude certain goods (especially those related to culture) from trade liberalization agreements. We also show that when the sensitivity of preferences to relative price is high, the distribution of preferences can fluctuate over time.