Intraindustry Trade Under Vertical Product Differentiation

Luca Lambertini ()

Working Papers from Dipartimento Scienze Economiche, Universita' di Bologna

Abstract: The paper focuses on trade between two countries where a vertically differentiated commodityis produced by a single firm in each country, operating initially in autarkic conditions. It is assumed that the two countries have overlapping income distributions, giving thus rise, under certain conditions, to two-way trade, i.e., a proper intraindustry trade. It emerges that while consumers always benefit from trade, especially if two-way trade arises, firms may have conflicting preferences on the choice between (i) autarky and trade, as well as (ii) one-way trade and two-way trade.

Date: 1995-10
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Persistent link: https://EconPapers.repec.org/RePEc:bol:bodewp:233

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