A "Reciprocal Dumping" Model of International Trade
AbstractThis paper develops a model in which the rivalry of oligopolistic firms serves as an independent cause of international trade. The model shows how such rivalry naturally gives rise to "dumping" of output in foreign markets, and shows that such dumping can be "reciprocal" -- that is, there may be two-way trade in the same product. Reciprocal dumpingis shown to be possible for fairly general specification of firm behaviour.The welfare effects of this seemingly pointless trade are ambiguous. On one hand, resources are wasted in the cross-handling of goods; on the other hand, increased competition reduces monopoly distortions. Surprisingly,in the case of free entry and Cournot behaviour reciprocal dumping is unanibiuously beneficial.
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Bibliographic InfoPaper provided by Queen's University, Department of Economics in its series Working Papers with number 405.
Date of creation: 1980
Date of revision:
Other versions of this item:
- Brander, James & Krugman, Paul, 1983. "A 'reciprocal dumping' model of international trade," Journal of International Economics, Elsevier, vol. 15(3-4), pages 313-321, November.
- James Brander & Paul Krugman, 1982. "A 'Reciprocal Dumping' Model of International Trade," Working Papers 513, Queen's University, Department of Economics.
- James A. Brander & Paul Krugman, 1983. "A 'Reciprocal Dumping' Model of International Trade," NBER Working Papers 1194, National Bureau of Economic Research, Inc.
- L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
- L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure
- L68 - Industrial Organization - - Industry Studies: Manufacturing - - - Appliances; Furniture; Other Consumer Durables
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