International trade, differentiated goods, and strategic asymmetry

Type of content
Journal Article
Thesis discipline
Degree name
Publisher
Wiley
Journal Title
Journal ISSN
Volume Title
Language
en
Date
2021
Authors
Gilbert J
Oladi R
Koska, Onur A.
Abstract

We scrutinize international trade arising from oligopolistic rivalry (reciprocal dumping) in a model where the goods are horizontally differentiated and where otherwise symmetric firms located in different regions adopt asymmetric strategies – one competing in prices and the other competing in quantities. Uni-directional and intra-industry trade appear endogenously in our framework. We show that as trade costs decline the equilibrium outcome will transition from autarky through a region of uni-directional trade, before intra-industry trade ultimately arises. In the uni-directional trade region, potential market entry by the rival has an impact on firm behavior even though the rival is not exporting. The implications of product differentiation and changing trade costs for trade volumes and for the gains from trade are asymmetric in general. Welfare may rise monotonically as trade costs fall for one of the economies, but will necessarily fall initially relative to autarky for the other.

Description
Citation
Gilbert J, Koska OA, Oladi R International trade, differentiated goods, and strategic asymmetry. Southern Economic Journal.
Keywords
Intra-industry trade, product differentiation, gains from trade, asymmetric strategies
Ngā upoko tukutuku/Māori subject headings
ANZSRC fields of research
14 Economics
Fields of Research::38 - Economics::3803 - Economic theory::380304 - Microeconomic theory
Rights
All rights reserved unless otherwise stated