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ANTIDUMPING, INTRA‐INDUSTRY TRADE, AND QUALITY REVERSALS
Author(s) -
MoragaGonzález José L.,
Viaene JeanMarie
Publication year - 2015
Publication title -
international economic review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 2.658
H-Index - 86
eISSN - 1468-2354
pISSN - 0020-6598
DOI - 10.1111/iere.12122
Subject(s) - dumping , quality (philosophy) , nash equilibrium , product (mathematics) , international economics , welfare , product differentiation , intra industry trade , economics , international trade , business , competition (biology) , monetary economics , industrial organization , trade barrier , microeconomics , market economy , philosophy , geometry , mathematics , epistemology , ecology , biology
We examine an export game where two (home and foreign) firms produce vertically differentiated products. The foreign firm is more R&D efficient and is based in a larger and richer market. The unique (risk‐dominant) Nash equilibrium exhibits intra‐industry trade, and the foreign producer manufactures a higher‐quality product. When transport costs are low, unilateral dumping by the foreign firm arises; otherwise, reciprocal dumping occurs. For some parameters, a domestic antidumping policy leads to a quality reversal in the international market whereby the home firm becomes the quality leader. This policy is desirable for the implementing country, though world welfare decreases.