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Reciprocal Dumping with Product Differentiation *
Author(s) -
Friberg Richard,
Ganslandt Mattias
Publication year - 2008
Publication title -
review of international economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.513
H-Index - 58
eISSN - 1467-9396
pISSN - 0965-7576
DOI - 10.1111/j.1467-9396.2008.00758.x
Subject(s) - autarky , product differentiation , economics , cournot competition , dumping , oligopoly , microeconomics , product (mathematics) , welfare , economic surplus , arrow , international trade , international economics , market economy , mathematics , computer science , programming language , geometry
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.