ANTIDUMPING,INTRA‐INDUSTRY TRADE,AND QUALITY REVERSALS |
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| Authors: | José L Moraga‐González Jean‐Marie Viaene |
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| Affiliation: | VU University Amsterdam and University of GroningenThe Netherlands |
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| 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. |
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