Gains from Trade in Differentiated Products: Japanese Compact Trucks

Abstract

We present a methodology for estimating the welfare gains from a productwith new characteristics, and apply it to Japanese and American compacttrucks. Our approach can be used on any products for which a hedonicregression can be estimated. For 1979-80 we find average welfare gains of$500-600 per Japanese truck. In later years the benefit to consumers isreduced by the tariff on imports and the introduction of American compactmodels. American compacts have consumer gains which are much less than theaverage for Japanese models, since for each American compact there is animport with very similar characteristics.