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Product differentiation, competition, and international trade

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  • Daniel M. Bernhofen

Abstract

In this paper the two workhorse theories of international trade under imperfect competition - Krugman's taste for variety model and Brander's strategic intra-industry trade model - are integrated into a single analytical framework. A quadratic utility function allows for a nesting of these two theories by postulating a consumer taste for variety over differentiated products, where the extent of product differentiation is linked to the intensity of strategic interaction among firms. The model yields intuitive predictions on the effects of the degree of product differentiation on the volume of trade and on the composition of the gains from trade under imperfect competition.

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Bibliographic Info

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

Volume (Year): 34 (2001)
Issue (Month): 4 (November)
Pages: 1010-1023

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Handle: RePEc:cje:issued:v:34:y:2001:i:4:p:1010-1023

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Cited by:
  1. Kwon, Chul-Woo & Lapan, Harvey E., 2008. "Does Market Familiarity Bless Multinational in Strategic Competition," Staff General Research Papers 32486, Iowa State University, Department of Economics.
  2. Collie, David R. & Le, Vo Phuong Mai, 2011. "Product Differentiation, the Volume of Trade and Profits under Cournot and Bertrand Duopoly," Cardiff Economics Working Papers E2011/26, Cardiff University, Cardiff Business School, Economics Section.
  3. Paulo Bastos & Odd Rune Straume, . "Globalization, product differentiation and wage inequality," Discussion Papers 10/03, University of Nottingham, GEP.
  4. Friberg, Richard & Ganslandt, Mattias, 2005. "Reciprocal Dumping with Bertrand Competition," CEPR Discussion Papers 5023, C.E.P.R. Discussion Papers.
  5. Yu-ter Wang, 2008. "Product Differentiation: An Alternative To Cvds," South African Journal of Economics, Economic Society of South Africa, vol. 76(3), pages 513-517, 09.
  6. 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.
  7. Fujiwara, Kenji, 2009. "Trade liberalization in a differentiated duopoly reconsidered," Research in Economics, Elsevier, vol. 63(3), pages 165-171, September.

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