Reciprocal Dumping with Product Differentiation

13 Pages Posted: 3 Nov 2008

See all articles by Richard Friberg

Richard Friberg

Stockholm School of Economics - Department of Economics

Mattias Ganslandt

Centre for European Law and Economics; Research Institute of Industrial Economics; University of Colorado at Boulder - Department of Economics

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Abstract

This paper examines if international trade can reduce total welfare in an international oligopoly with differentiated goods. We show that intra-industry trade, i.e. reciprocal dumping, can result in lower total surplus than autarky in a Cournot model for any degree of product differentiation. Moreover, trade can reduce welfare compared to autarky in a Bertrand model when the local markets are sufficiently competitive and products are sufficiently close substitutes. Otherwise it unambiguously increases welfare.

Suggested Citation

Friberg, Richard and Ganslandt, Mattias, Reciprocal Dumping with Product Differentiation. Review of International Economics, Vol. 16, Issue 5, pp. 942-954, November 2008. Available at SSRN: https://ssrn.com/abstract=1292037 or http://dx.doi.org/10.1111/j.1467-9396.2008.00758.x

Richard Friberg (Contact Author)

Stockholm School of Economics - Department of Economics ( email )

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Mattias Ganslandt

Centre for European Law and Economics ( email )

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HOME PAGE: http://www.celec.eu

Research Institute of Industrial Economics ( email )

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+46 8 665 4599 (Fax)

HOME PAGE: http://www.industrialeconomics.se/mg

University of Colorado at Boulder - Department of Economics ( email )

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Boulder, CO 80309
United States
303-4927588 (Phone)

HOME PAGE: http://www.mattiasganslandt.com

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