Inefficient trade patterns: Excessive trade, cross-hauling and dumping (original) (raw)

Optimal Reciprocal Dumping in a Managed Trade Regime

Revista Mexicana de Economía y Finanzas, 2019

The purpose of this article is to examine the strategic relationship between trade policy in a managed protection regime and commercial exchange at prices below normal value. It presents a three-stage model of imperfect competition that incorporates the possibility for the government authority to influence the production decisions of companies through a credible threat, by means of a specific tariff. This methodology-in a context of segmented markets, Cournot conjectures, and the application of an optimal tariff-generates a mechanism of incentives (which are not sufficient from a social welfare perspective) for domestic and foreign companies to practice reciprocal dumping. A general conclusion is that a free trade policy would be counterproductive, since it would eliminate the incentives that domestic and foreign companies would have to carry out the commercial exchange that would diminish the loss of welfare associated with the existence of monopolies in both markets.

Repeated games and the reciprocal dumping model of trade

Journal of International Economics, 1986

A repeated game version of the basic model is analyzed. In the Brander-Krugman model, rivalry among oligopolistic firms gives rise to international trade. It is now shown that no trade, which is welfare-reducing when transportation costs are negligible, is a sJrong Nash equilibrium of the supergame. The threat strategies that support 'no trade', the discount rate, and the crucial role of transportation costs are discussed, extending the Brander-Krugman analysis in a natural way.

An empirical assessment of the welfare effects of reciprocal dumping

Journal of International Economics, 2006

Can two-way trade in similar products lead to lower welfare than if such trade was banned? Theory answers yes. To empirically investigate this proposition we examine Swedish imports of bottled water. Assuming one-shot (Bertrand and Cournot) competition, we can use the estimates from a structural model of demand to uncover marginal costs. We simulate the effect on consumer and producer surplus of banning imports. We do not find convincing evidence that banning imports would increase overall welfare. Given our choice of market this suggests we should not be overly concerned with the welfare effects of two-way trade in consumer goods that are close to homogenous.

Production Cost Asymmetry, Minimum Access and Reciprocal Dumping

SSRN Electronic Journal, 2013

In this article we propose a bilateral dumping model in which the minimum access level is endogenous. Regions compete with one another using Cournot conjectures and engage in interregional dumping as in Brander and Krugman's (1983) reciprocal dumping model. International trade is hindered by restrictive Tariff rate Quota (TRQs). The model features two regions and one product. We derive the conditions under which it is optimal to observe interregional trade and those under which trade does not exist. The results show that the world price and the difference in production costs between regions play an important role in determining whether bilateral trade exists. In the presence of bilateral trade, the region with the largest market size will obtain the largest share of import volumes permitted under the minimum access system while in the absence of interregional trade, the distribution of import permits between regions will also depends on the product cost asymmetry. When only the most efficient region exports to the least efficient region, production costs asymmetry, transaction costs and world price level determine whether the smaller or larger region obtains the larger share of product import allowed under minimum access commitment. In all cases, we show that in a country like Canada, creation of "artificial barriers" to interprovincial trade of products under supply management system lowers the welfare of at least one of the regions, along with the global welfare.

Prices, Delay, and the Dynamics of Trade

Journal of Economic Theory, 2002

We characterize trading patterns and their dynamics in a market in which trade is bilateral, finding a trading partner is costly, prices are determined by bargaining, and preferences are private information. We also determine how the trading pattern depends on the market composition. Our analysis reveals that market equilibria may be inefficient and may exhibit delay. As the market becomes frictionless the welfare loss due to inefficiency vanishes; delay persists, however, and in this respect frictionless markets are not competitive.

Trade policy and parallel imports

European Journal of Political Economy, 2003

We consider the simultaneous choice of parallel importing regime and tariff policy in a setting of international price discrimination by a monopolist. We show that an importer's optimal tariff decreases when parallel imports (PIs) are permitted. This may lead to the monopolist ...

Administrative Barriers and the Lumpiness of Trade

2011

Abstract We document that administrative trade costs of per shipment nature (documentation, customs clearance and inspection) lead to less frequent and larger-sized shipments, ie, more lumpiness, in international trade. We build a model where consumers have heterogeneous preferences for the arrival time of a non-storable product and firms compete by selecting the time of their shipment.

Trade policy with increasing returns and imperfect competition

Journal of International Economics, 1988

A number of etQcIIt under d&rent derive d&rent results about the ekts of trade and industrial the number of firms is fixed than when there is frse entry. 1. lo positive or normative implications of these twin ass papers produce a bewildering 'model' in the sense we An example of this can cost, then there 1s a 0022-1996/88/S3,50 0 1988, Elsevier §ciencze Publishers B.V. (North-J.R. Mmkusen and A.J. Venubks, Tmde @icy Peru by Horstmann and Markusen (1986) and Venables (1685) demonstrate the role of export subsidies then depends crucially on whether intemational markets are segmented or integrated. In the former case firms can set es in domestic and forei e p&& of a pi&duct twa countries so as to equalize product prices in model from which to ng the industry structure an market structure aim is to *use the model to generate comparisons the literature. In addition, we obtain some new markets, and con-In order to accomphsh this purpose in a relatively transparent way, we in other directions. We have done this with a following assumptions: (a) demand curves are and subsidies are consideted; (c) marginal costs t; and (d) conjectures are Coumot. While many of the aboveassumptions in any c8se, it is nevertheless true the four models are not robust with respect to any rest&s cao, for example, turn on Coumot [Eaton and Grossman (1986)]. But s to offer a meaningful comparison of model% not any single case. We thus feel that '&e sacrifice of y is worthwhile, but urge those not familiat with the literature to ky implications of any particular model may not be X=n,x and X+=ngF, etc. n,x=X=ll(a-p,--P,,h nyy= Y=l(a-q-qPy-PJl9 aud fore@ demands arc n# = X* = l*(apz -b(pz -P:l}, n,p = Y*=f+(a-p:-bfp:-pz)}.

Market share, cost-based dumping, and anti-dumping policy

Canadian Journal of Economics/Revue Canadienne d`Economique, 2000

This paper studies the occurrence of dumping and the implications of anti-dumping duties in a deterministic price-setting two-period duopoly model for differentiated products. When current market shares matter for future demand, cost-based dumping can be profitable. Dumping thus arises as a form of investment in market shares. This might trigger the application of anti-dumping law. We further show that correctly anticipated duties do not necessarily hinder firms from selling below costs. The mere existence of anti-dumping law, however, significantly changes the structure of the game, leading to higher first-period prices for both firms. JEL Classification: F12, F13 Parts de marché, dumping défini par les coûts, et politiques anti-dumping. Ce mémoire étudie le phénomène de dumping et les implications des droits compensatoires anti-dumping dans un modèle de duopole de produits différenciés dans un cadre de deux périodes où le processus de définition des prix est déterministe. Quand la nature présente des parts de marché a des conséquences sur la demande future, le dumping défini par les coûts peut être profitable. Dans ce cas, le dumping émerge en tant que forme d'investissement dans le renforcement des parts de marché. Voilà qui peut déclencher l'application de la loi antidumping. On montre que des droits compensatoires correctement anticipés n'empêchent pas nécessairement les entreprises de vendre à des prix plus bas que leurs coûts. Cependant, le seul fait de l'existence de la loi anti-dumping modifie substantiellement la structure du jeu et conduit les deux entreprises à établir des prix plus élevés dans la première période.