Reciprocal Dumping With Product Differentiation

20 Pages Posted: 21 Mar 2007

See all articles by Mattias Ganslandt

Mattias Ganslandt

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

Richard Friberg

Stockholm School of Economics - Department of Economics

Multiple version iconThere are 2 versions of this paper

Date Written: March 8, 2007

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 trade cost as long as trade occurs in equilibrium, hence a marginal reduction of trade costs that increases trade may reduce welfare. We also show that international trade can reduce welfare compared to autarky in a Cournot model for any degree of product differentiation and in a Bertrand model when the local markets are sufficiently competitive and products are sufficiently close substitutes.

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

JEL Classification: F12, F15, L13

Suggested Citation

Ganslandt, Mattias and Friberg, Richard, Reciprocal Dumping With Product Differentiation (March 8, 2007). Available at SSRN: https://ssrn.com/abstract=970362 or http://dx.doi.org/10.2139/ssrn.970362

Mattias Ganslandt (Contact Author)

Centre for European Law and Economics ( email )

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

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

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

Richard Friberg

Stockholm School of Economics - Department of Economics ( email )

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Sveavagen 65
S-113 83 Stockholm
Sweden
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+46 8 720 7752 (Fax)

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