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Reciprocal Dumping with Bertrand Competition

Richard Friberg and Mattias Ganslandt ()

No 638, Working Paper Series from Research Institute of Industrial Economics

Abstract: 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 autarchy for any degree of product differentiation. Under Bertrand competition we show that trade may reduce welfare compared to autarchy, if firms produce sufficiently close substitutes and the autarchy equilibrium is sufficiently competitive. Otherwise it can not.

Keywords: Reciprocal Dumping; Intra-Industry Trade; Oligopoly; Product Differentiation; Transport Costs (search for similar items in EconPapers)
JEL-codes: F12 F15 L13 (search for similar items in EconPapers)
Pages: 20 pages
Date: 2005-03-16
New Economics Papers: this item is included in nep-com and nep-mic
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Working Paper: Reciprocal Dumping with Bertrand Competition (2005) Downloads
Working Paper: Reciprocal dumping with Bertrand competition (2005) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:hhs:iuiwop:0638

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