Reciprocal Dumping with Product Differentiation

Reprint No. 2008:25

Author(s): Richard Friberg and Mattias GanslandtYear: 2008 Title: Review of International Economics Volume (No.): 16 (5) Pages: 942–954

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.

Friberg, Richard and Mattias Ganslandt (2008), "Reciprocal Dumping with Product Differentiation". Review of International Economics 16(5), 942–954.

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Martin Ljunge, IFN, is the author of a chapter, "Trust promotes health: addressing reverse causality by studying children of immigrants", in a new book edited by Sherman Folland and Eric Nauenberg. The cutting edge of research is presented, covering the ever-expanding social capital field.

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