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Product differentiation and the gains from trade under Bertrand duopoly

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  • Roger Clarke
  • David 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.

Suggested Citation

  • Roger Clarke & David Collie, 2003. "Product differentiation and the gains from trade under Bertrand duopoly," Canadian Journal of Economics, Canadian Economics Association, vol. 36(3), pages 658-673, August.
    • Handle: RePEc:cje:issued: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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    JEL classification:

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

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