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North-South competition, policy rivalry and profitability


  • Satya P. Das

    () (Indian Statistical Institute, New Delhi)

  • Subhadip Ghosh

    (Indian Statistical Institute, New Delhi)


In the strategic trade policy literature, the firms typically make positive profits at equilibrium policy levels. We show that this is not always true when firms from the developed (North) and developing (South) countries compete in the Northern market. In particular, the South firm may be pushed out of the Northern market. On the other hand, the Northern firm always maintains a market share in the South market in policy equilibrium. The critical assumption is that the Northern firms produce products of a superior quality than do their Southern counterparts.

Suggested Citation

  • Satya P. Das & Subhadip Ghosh, 2003. "North-South competition, policy rivalry and profitability," Indian Statistical Institute, Planning Unit, New Delhi Discussion Papers 03-07, Indian Statistical Institute, New Delhi, India.
  • Handle: RePEc:ind:isipdp:03-07

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    References listed on IDEAS

    1. Rosenkranz, Stephanie, 1995. "Innovation and cooperation under vertical product differentiation," International Journal of Industrial Organization, Elsevier, vol. 13(1), pages 1-22, March.
    2. Das, Satya P. & Donnenfeld, Shabtai, 1989. "Oligopolistic competition and international trade : Quantity and quality restrictions," Journal of International Economics, Elsevier, vol. 27(3-4), pages 299-318, November.
    3. Jonathan Eaton & Gene M. Grossman, 1986. "Optimal Trade and Industrial Policy Under Oligopoly," The Quarterly Journal of Economics, Oxford University Press, vol. 101(2), pages 383-406.
    4. Avner Shaked & John Sutton, 1982. "Relaxing Price Competition Through Product Differentiation," Review of Economic Studies, Oxford University Press, vol. 49(1), pages 3-13.
    5. Jaskold Gabszewicz, J. & Thisse, J. -F., 1979. "Price competition, quality and income disparities," Journal of Economic Theory, Elsevier, vol. 20(3), pages 340-359, June.
    6. Brander, James A. & Spencer, Barbara J., 1985. "Export subsidies and international market share rivalry," Journal of International Economics, Elsevier, vol. 18(1-2), pages 83-100, February.
    7. Flam, Harry & Helpman, Elhanan, 1987. "Vertical Product Differentiation and North-South Trade," American Economic Review, American Economic Association, vol. 77(5), pages 810-822, December.
    8. Bond, Eric W., 1988. "Optimal commercial policy with quality-differentiated products," Journal of International Economics, Elsevier, vol. 25(3-4), pages 271-290, November.
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    More about this item


    North-South trade; Vertically differentiated product; Strategic Trade Policy; Third market competion; Internal market competition;

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations

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