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Product differentiation, competition, and international trade

Author

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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.

Suggested Citation

  • Daniel M. Bernhofen, 2001. "Product differentiation, competition, and international trade," Canadian Journal of Economics, Canadian Economics Association, vol. 34(4), pages 1010-1023, November.
  • Handle: RePEc:cje:issued:v:34:y:2001:i:4:p:1010-1023
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    Citations

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    Cited by:

    1. Fujiwara, Kenji, 2009. "Trade liberalization in a differentiated duopoly reconsidered," Research in Economics, Elsevier, vol. 63(3), pages 165-171, September.
    2. Brander, James A. & Spencer, Barbara J., 2015. "Intra-industry trade with Bertrand and Cournot oligopoly: The role of endogenous horizontal product differentiation," Research in Economics, Elsevier, vol. 69(2), pages 157-165.
    3. Kwon, Chul-Woo & Lapan, Harvey E., 2011. "Does market familiarity bless multinational in strategic competition?," Japan and the World Economy, Elsevier, vol. 23(1), pages 58-62, January.
    4. 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.
    5. Paulo Bastos & Odd Rune Straume, 2012. "Globalization, product differentiation, and wage inequality," Canadian Journal of Economics, Canadian Economics Association, vol. 45(3), pages 857-878, August.
    6. Friberg, Richard & Ganslandt, Mattias, 2005. "Reciprocal dumping with Bertrand competition," SSE/EFI Working Paper Series in Economics and Finance 592, Stockholm School of Economics.
    7. David R. Collie & Vo Phuong Mai Le, 2015. "Product Differentiation, the Volume of Trade and Profits under Cournot and Bertrand Duopoly," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 22(1), pages 73-86, February.
    8. Collie, David R., 2016. "Gains from variety? Product differentiation and the possibility of losses from trade under Cournot oligopoly with free entry," Economics Letters, Elsevier, vol. 146(C), pages 55-58.
    9. José Daniel Reyes, 2013. "Trade Liberalization and the Adoption of Antidumping Laws in Developing Countries," REVISTA EQUIDAD Y DESARROLLO, UNIVERSIDAD DE LA SALLE, December.
    10. 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, September.

    More about this item

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation

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