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Intraindustry Trade Under Vertical Product Differentiation

  • L. Lambertini

The paper focuses on trade between two countries where a vertically differentiated commodityis produced by a single firm in each country, operating initially in autarkic conditions. It is assumed that the two countries have overlapping income distributions, giving thus rise, under certain conditions, to two-way trade, i.e., a proper intraindustry trade. It emerges that while consumers always benefit from trade, especially if two-way trade arises, firms may have conflicting preferences on the choice between (i) autarky and trade, as well as (ii) one-way trade and two-way trade.

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Paper provided by Dipartimento Scienze Economiche, Universita' di Bologna in its series Working Papers with number 233.

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Date of creation: Oct 1995
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Handle: RePEc:bol:bodewp:233
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  1. Kala Krishna, 1985. "Protection and the Product Line: Monopoly and Product Quality," NBER Working Papers 1537, National Bureau of Economic Research, Inc.
  2. Chang, Winston W & Chen, Fang-yueh, 1994. "Vertically Related Markets: Export Rivalry between DC and LDC Firms," Review of International Economics, Wiley Blackwell, vol. 2(2), pages 131-42, June.
  3. Flam, Harry & Helpman, Elhanan, 1987. "Vertical Product Differentiation and North-South Trade," American Economic Review, American Economic Association, vol. 77(5), pages 810-22, December.
  4. Kala Krishna, 1985. "Tariffs vs. Quotas with Endogenous Quality," NBER Working Papers 1535, National Bureau of Economic Research, Inc.
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