Antidumping, intra-industry trade, and quality reversals

José L. Moraga González, Jean-Marie Viaene

Research output: Contribution to journalArticleAcademicpeer-review

5 Citations (Scopus)
100 Downloads (Pure)

Abstract

We examine an export game where two (home and foreign) firms produce vertically differentiated products. The foreign firm is more R&D efficient and is based in a larger and richer market. The unique (risk‐dominant) Nash equilibrium exhibits intra‐industry trade, and the foreign producer manufactures a higher‐quality product. When transport costs are low, unilateral dumping by the foreign firm arises; otherwise, reciprocal dumping occurs. For some parameters, a domestic antidumping policy leads to a quality reversal in the international market whereby the home firm becomes the quality leader. This policy is desirable for the implementing country, though world welfare decreases.
Original languageEnglish
Pages (from-to)777-803
Number of pages27
JournalInternational Economic Review
Volume56
Issue number3
DOIs
Publication statusPublished - Aug-2015

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