Reciprocal Dumping with Product Differentiation*

Richard Friberg and Mattias Ganslandt

Review of International Economics, 2008, vol. 16, issue 5, 942-954

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.

Date: 2008
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https://doi.org/10.1111/j.1467-9396.2008.00758.x

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