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Intraindustry Trade in Identical Products: a Portfolio Approach


  • Mahmudul Anam

    (York University, Toronto, Ontario, Canada)

  • Shin--Hwan Chiang

    (York University, Toronto, Ontario, Canada)


In the traditional model, intraindustry trade in an identical product is driven by the profit margin each firm perceives in the rival market on the basis of Cournot conjectures. The authors demonstrate that when markets are stochastic and potentially correlated, benefits from diversification create added incentives for cross--hauling for risk--averse Cournot duopolists. The portfolio motive for cross--hauling makes the unusual pattern of trade a theoretically more robust phenomenon than has been recognized in the traditional models. The benefits from diversification can raise producer welfare in the intraindustry trade equlibrium, unlike in the deterministic model. Copyright Blackwell Publishing Ltd. 2003

Suggested Citation

  • Mahmudul Anam & Shin--Hwan Chiang, 2003. "Intraindustry Trade in Identical Products: a Portfolio Approach," Review of International Economics, Wiley Blackwell, vol. 11(1), pages 90-100, February.
  • Handle: RePEc:bla:reviec:v:11:y:2003:i:1:p:90-100

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    References listed on IDEAS

    1. Maurice Obstfeld & Kenneth S. Rogoff, 1996. "Foundations of International Macroeconomics," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262150476, July.
    2. Betts, Caroline & Devereux, Michael B., 2000. "Exchange rate dynamics in a model of pricing-to-market," Journal of International Economics, Elsevier, vol. 50(1), pages 215-244, February.
    3. Yun, Tack, 1996. "Nominal price rigidity, money supply endogeneity, and business cycles," Journal of Monetary Economics, Elsevier, vol. 37(2-3), pages 345-370, April.
    4. Calvo, Guillermo A., 1983. "Staggered prices in a utility-maximizing framework," Journal of Monetary Economics, Elsevier, vol. 12(3), pages 383-398, September.
    5. Weil, Philippe, 1989. "Overlapping families of infinitely-lived agents," Journal of Public Economics, Elsevier, vol. 38(2), pages 183-198, March.
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    Cited by:

    1. Martin Cincibuch & Jiří Podpiera, 2006. "Beyond Balassa-Samuelson: Real appreciation in tradables in transition countries," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 14(3), pages 547-573, July.
    2. W. Charles Sawyer & Richard Sprinkle, 2012. "The Role of Intra-industry Trade in the World Economy," Working Papers 201203, Texas Christian University, Department of Economics.

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