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Product differentiation and the gains from trade under Bertrand duopoly

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  • Roger Clarke
  • David R Collie

Abstract

. In the literature on the welfare effects of free trade under imperfect competition, one important case seems to have been overlooked, and that is the Bertrand duopoly model with differentiated products. Although many authors have analysed the welfare effects of free trade under Cournot duopoly and demonstrated the possibility of losses from trade, there has been no thorough analysis of the welfare effects of free trade under Bertrand duopoly. In this article we present a thorough analysis of the welfare effects of free trade under Bertrand duopoly with differentiated products, and it is shown that there are always gains from trade. JEL Classification: F12 Différenciation de produits et gains du commerce international dans un duopole à la Bertrand. Dans la littérature spécialisée sur les effets de bien‐être du libre échange en régime de concurrence imparfaite, un cas de figure important semble avoir échappéà l’attention des chercheurs – celui du duopole à la Bertrand quand les produits sont différenciés. Même si de nombreux travaux ont analysé les effets de bien‐être du libre échange dans un monde de duopole à la Cournot, et montré la possibilité de pertes causées par le commerce international, il n’y a pas eu d’analyse approfondie des effets de bien‐être du libre échange dans un duopole à la Bertrand. Ce mémoire présente une telle analyse quand les produits sont différenciés et montre qu’il y a toujours des gains engendrés par le libre échange.

Suggested Citation

  • Roger Clarke & David R Collie, 2003. "Product differentiation and the gains from trade under Bertrand duopoly," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 36(3), pages 658-673, August.
  • Handle: RePEc:wly:canjec:v:36:y:2003:i:3:p:658-673
    DOI: 10.1111/1540-5982.t01-2-00007
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    References listed on IDEAS

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    1. 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.
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    4. David R. Collie, 1996. "Gains and losses from unilateral free trade under oligopoly," Discussion Papers (REL - Recherches Economiques de Louvain) 1996024, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
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    JEL classification:

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

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