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Attitudes towards foreign products and international price competition

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  • NEVEN, Damien
  • NORMAN, George
  • THISSE, Jacques-François

Abstract

In this paper we analyze price competition between firms established in different countries when demand is sensitive to national biases. The intensity of this bias varies across consumers. In this context, trade arises because of the dispersion of consumers' perception of the foreign good; when consumer attitudes are diverse enough, one firm concentrates on consumers with an intensive bias, leaving room for the other, which will serve consumers with a low bias. Next, an increase in import tariff will unambiguously lead to a general increase in price, since, in equilibrium, the domestic firm will decide to increase margins. Finally, we identify conditions under which "Buy Domestic" campaigns increase local welfare and output.
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Suggested Citation

  • NEVEN, Damien & NORMAN, George & THISSE, Jacques-François, 1991. "Attitudes towards foreign products and international price competition," LIDAM Reprints CORE 948, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    • Handle: RePEc:cor:louvrp:948
    Note: In : Canadian Journal of Economics. Revue canadienne d'économique, 24(1), 1-11, 1991
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    Cited by:

    1. Jean-Marc Callois & Carl Gaigné, 2010. "Attitudes Towards Foreign Products and Welfare with Capital Mobility," Open Economies Review, Springer, vol. 21(5), pages 751-770, November.
    2. Dos Santos Ferreira, Rodolphe & Thisse, Jacques-Francois, 1996. "Horizontal and vertical differentiation: The Launhardt model," International Journal of Industrial Organization, Elsevier, vol. 14(4), pages 485-506, June.
    3. Keith Head & Thierry Mayer, 2000. "Non-Europe: The magnitude and causes of market fragmentation in the EU," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 136(2), pages 284-314, June.
    4. Barros, Pedro Pita & Martinez-Giralt, Xavier, 1999. "On the effects of antidumping legislation," Regional Science and Urban Economics, Elsevier, vol. 29(1), pages 53-72, January.
    5. Toru Kikuchi, 2010. "A simple model of foreign brand penetration under monopolistic competition," Journal of Economics, Springer, vol. 100(3), pages 235-245, July.
    6. Klimenko, Mikhail M., 2009. "Policies and international trade agreements on technical compatibility for industries with network externalities," Journal of International Economics, Elsevier, vol. 77(2), pages 151-166, April.
    7. Insch, Andrea & Prentice, Rebecca S. & Knight, John G., 2011. "Retail buyers’ decision-making and buy national campaigns," Australasian marketing journal, Elsevier, vol. 19(4), pages 257-266.
    8. Michal Ostatnicky, 2010. "Oligopolistic Price Competition with Informed and Uninformed Buyers," CERGE-EI Working Papers wp413, The Center for Economic Research and Graduate Education - Economics Institute, Prague.
    9. Ndlovu N & Mafumbate J & Mafuka A & Brena M, 2017. "The Impact of the Buy Zimbabwe Campaign on Performance of Zimbabwean Companies in the Retail Sector," Journal of Economics and Behavioral Studies, AMH International, vol. 8(6), pages 227-236.

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