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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.

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Bibliographic Info

Article provided by Canadian Economics Association in its journal Canadian Journal of Economics.

Volume (Year): 24 (1991)
Issue (Month): 2 (May)
Pages: 391-404

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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. Straume, O.R., 1999. "Union Collusion and Intra-Industry Trade," Norway; Department of Economics, University of Bergen 1399, Department of Economics, University of Bergen.
  2. Fung, Kwok-Chiu & Garcia-Herrero, Alicia & Ng, Francis, 2013. "International Price Dispersion and Market Segmentation in Japan and the United States: Theory and Empirics," ADBI Working Papers 417, Asian Development Bank Institute.
  3. Pio Baake & Hans-Theo Normann, 2002. "Collusive intra-industry trade in identical commodities," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 138(3), pages 482-492, September.
  4. 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), October.
  5. Dermot Leahy & J. Peter Neary, 2010. "Oligopoly And Trade," Economics, Finance and Accounting Department Working Paper Series n215-10.pdf, Department of Economics, Finance and Accounting, National University of Ireland - Maynooth.
  6. Wegberg, M.J.A.M. & Witteloostuijn, A. van & Roscam Abbing, M., 1994. "Multimarket and multiproject collusion: why European integration may reduce intra--Community competition," Open Access publications from Tilburg University urn:nbn:nl:ui:12-5373405, Tilburg University.
  7. L. Colombo & P. Labrecciosa & L. Lambertini, 2005. "A Chicken Game of Intraindustry Trade," Working Papers 548, Dipartimento Scienze Economiche, Universita' di Bologna.
  8. Aditya Bhattacharjea & Uday Bhanu Sinha, 2012. "Multi-market Collusion with Territorial Allocation," Working papers 217, Centre for Development Economics, Delhi School of Economics.

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