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Antidumping, Intra‐Industry Trade, And Quality Reversals

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  • José L. Moraga‐González
  • Jean‐Marie Viaene

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.

Suggested Citation

  • José L. Moraga‐González & Jean‐Marie Viaene, 2015. "Antidumping, Intra‐Industry Trade, And Quality Reversals," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 56(3), pages 777-803, August.
    • Handle: RePEc:wly:iecrev:v:56:y:2015:i:3:p:777-803
    DOI: 10.1111/iere.12122
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    Cited by:

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