Reciprocal Dumping with Bertrand Competition

31 Pages Posted: 24 Aug 2005

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

Date Written: April 2005

Abstract

This paper examines if international trade can reduce total welfare in an international oligopoly with differentiated goods. We show that welfare is a U-shaped function in the transport cost as long as trade occurs in equilibrium. With a Cournot duopoly trade can reduce welfare compared to autarky for any degree of product differentiation. Under Bertrand competition, we show that trade may reduce welfare compared to autarky, if firms produce sufficiently close substitutes and the autarky equilibrium is sufficiently competitive. Otherwise it cannot.

Keywords: Reciprocal dumping, intra-industry trade, oligopoly, product differentiation, transport costs

JEL Classification: F12, F15, L13

Suggested Citation

Friberg, Richard and Ganslandt, Mattias, Reciprocal Dumping with Bertrand Competition (April 2005). CEPR Discussion Paper No. 5023. Available at SSRN: https://ssrn.com/abstract=772793

Richard Friberg (Contact Author)

Stockholm School of Economics - Department of Economics ( email )

P.O. Box 6501
Sveavagen 65
S-113 83 Stockholm
Sweden
+46 8 736 9645 (Phone)
+46 8 720 7752 (Fax)

Mattias Ganslandt

Centre for European Law and Economics ( email )

Rue du Luxembourg 3
Bruxelles, BE-1000
Belgium
+32 479 639 383 (Phone)
+32 2 888 9161 (Fax)

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

Research Institute of Industrial Economics ( email )

Box 55665
S-102 15 Stockholm
Sweden
+46 8 665 4500 (Phone)
+46 8 665 4599 (Fax)

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

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

Campus Box 256
Boulder, CO 80309
United States
303-4927588 (Phone)

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

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