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Collusive Intra-industry Trade

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  • K. C. Fung

Abstract

This paper examines the phenomenon of intraindustry trade under the condition of firm collusion. It is shown that with homogeneous goods, no collusive intraindustry trade can occur. But if the products are differentiated, firms will achieve their joint monopoly profits by exporting to each other's market. Thus, the observation of the occurrence of intraindustry trade does not necessarily mean the absence of collusion. The paper further studies the properties of such collusive trade. Despite the fact that the firms are joint monopolists, collusive two-way trade is still welfare superior to autarky for the world. Collusive intraindustry trade is also more sustainable if the firms' production costs are more similar.

Suggested Citation

  • K. C. Fung, 1991. "Collusive Intra-industry Trade," Canadian Journal of Economics, Canadian Economics Association, vol. 24(2), pages 391-404, May.
    • Handle: RePEc:cje:issued:v:24:y:1991:i:2:p:391-404
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    Citations

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    Cited by:

    1. Hartman, Darcy A. & Henderson, Dennis R. & Sheldon, Ian M., 1993. "A Cross-Section Analysis Of The Intra-Industry Trade In The U.S. Processed Food And Beverage Sectors," Agricultural and Resource Economics Review, Northeastern Agricultural and Resource Economics Association, vol. 22(2), pages 1-10, October.
    2. Shuhei Nishitateno, 2015. "Network Effects on Trade in Intermediate Goods: Evidence from the Automobile Industry," The Japanese Economic Review, Japanese Economic Association, vol. 66(3), pages 354-370, September.
    3. K.C. Fung & Alicia Garcia-Herrero & Francis Ng, 2013. "International Price Dispersion and Market Segmentation in Japan and the United States : Theory and Empirics," Microeconomics Working Papers 23410, East Asian Bureau of Economic Research.
    4. Pio Baake & Hans-Theo Normann, 2002. "Collusive intra-industry trade in identical commodities," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 138(3), pages 482-492, September.
    5. L. Colombo & P. Labrecciosa & L. Lambertini, 2005. "A Chicken Game of Intraindustry Trade," Working Papers 548, Dipartimento Scienze Economiche, Universita' di Bologna.
    6. Bhattacharjea, Aditya & Sinha, Uday Bhanu, 2015. "Multi-market collusion with territorial allocation," International Journal of Industrial Organization, Elsevier, vol. 41(C), pages 42-50.
    7. Dermot Leahy & J. Peter Neary, 2013. "Oligopoly and Trade," Palgrave Macmillan Books, in: Daniel Bernhofen & Rod Falvey & David Greenaway & Udo Kreickemeier (ed.), Palgrave Handbook of International Trade, chapter 7, pages 197-235, Palgrave Macmillan.
    8. Straume, Odd Rune, 2002. "Union collusion and intra-industry trade," International Journal of Industrial Organization, Elsevier, vol. 20(5), pages 631-652, May.
    9. Aya Ahmed, 2015. "Asymmetric cartel formation under trade liberalization: Heterogeneous ï¬ rms with capacity constraints," Working Papers 2015.02, International Network for Economic Research - INFER.
    10. Levenstein, Margaret C. & Sivadasan, Jagadeesh & Suslow, Valerie Y., 2015. "The effect of competition on trade: Evidence from the collapse of international cartels," International Journal of Industrial Organization, Elsevier, vol. 39(C), pages 56-70.
    11. Damoun Ashournia & Per Svejstrup Hansen & Jonas Worm Hansen, 2013. "Trade Liberalization and the Degree of Competition in International Duopoly," Review of International Economics, Wiley Blackwell, vol. 21(5), pages 1048-1059, November.

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