Working Paper Series
Reciprocal Dumping with Bertrand Competition
() and Mattias Ganslandt
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; (follow links to similar papers)
JEL-Codes: F12; F15; L13; (follow links to similar papers)
20 pages, March 16, 2005
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