Reciprocal Dumping with Bertrand Competition
Richard Friberg and
Mattias Ganslandt ()
No 5023, CEPR Discussion Papers from C.E.P.R. Discussion Papers
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 transport cost as long as trade occurs in equilibrium. With a Cournot duopoly trade can reduce welfare compared to autarky for any degree of product differentiation. Under Bertrand competition we show that trade may reduce welfare compared to autarky, if firms produce sufficiently close substitutes and the autarky equilibrium is sufficiently competitive. Otherwise it cannot.
Keywords: intra-industry trade; oligopoly; product differentiation; reciprocal dumping; transport costs (search for similar items in EconPapers)
JEL-codes: F12 F15 L13 (search for similar items in EconPapers)
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Working Paper: Reciprocal dumping with Bertrand competition (2005)
Working Paper: Reciprocal Dumping with Bertrand Competition (2005)
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