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A "Reciprocal Dumping" Model of International Trade

Author

Listed:
  • James Brander
  • Paul Krugman

Abstract

This paper develops a model where rivalry of oligopolistic firms serves as an independent cause of international trade. The model shows how such rivalry naturally gives rise to "dumping" of output in foreign markets, and show such dumping can be reciprocal -- there may be two-way trade in the same product. Reciprocal dumping is possible for fairly general specifications of firm behaviour. The welfare effects of this seemingly pointless trade are ambiguous: resources are wasted, but increased competition reduces monopoly distortions. Surprisingly, with free entry and Cournot behaviour, reciprocal dumping is unambiguously beneficial.
(This abstract was borrowed from another version of this item.)
(This abstract was borrowed from another version of this item.)
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • James Brander & Paul Krugman, 1980. "A "Reciprocal Dumping" Model of International Trade," Working Papers 405, Queen's University, Department of Economics.
  • Handle: RePEc:qed:wpaper:405
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    JEL classification:

    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure
    • L68 - Industrial Organization - - Industry Studies: Manufacturing - - - Appliances; Furniture; Other Consumer Durables

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