Reciprocal Dumping Research Articles

Some Evidence Regarding the Reciprocal Dumping Hypothesis

Reciprocal dumping occurs in intraindustry trade (IIT) when domestic and foreign firms that have market (monopoly) power effect cross hauling through International price discrimination. Data relating to 255 U. S. 4-digit SIC manufacturing industries were used to test the existence of the necessary (but not sufficient) characteristics for reciprocal dumping of (1) intraindustry trade, (2) monopolistic firms, and (3) high profits. These characteristics were found not to exist among U. S. manufacturing industries. [F12]

A note on multinational corporations in a model of reciprocal dumping

This paper introduces multinational corporations (MNCs) into a model of reciprocal dumping. The main results we obtain are: (i) the presence of transport costs causes mutual penetration of MNC's; (ii) the larger country tends to lose and the smaller country tends to gain; and (iii) global welfare increases.

Multi-Market Oligopoly with Production Before Sales

When production takes place before firms allocate output to different markets, the equilibrium may be different from the one corresponding to simultaneous production and allocation decisions. The difference arises when firms account for the output-shifting effect their own production levels have on the allocation decisions of rivals. The authors determine conditions under which the two equilibria are different and indicate the direction of change from the simultaneous equilibrium. Applying the model to reciprocal dumping ($2B la Brander-Krugman 1983), the condition reduces to the concavity or convexity of demand. Copyright 1989 by Blackwell Publishing Ltd.

Repeated games and the ‘reciprocal dumping’ model of trade

A repeated game version of the basic Brander and Krugman (1983) 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 strong 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 BranderKrugman analysis in a natural way.

A ‘reciprocal dumping’ model of international trade

This paper develops a model in which the rivalry of oligopolistic firms serves as an independent cause of international trade. The model shows how such rivalry naturally gives rise to ‘dumping’ of output in foreign markets, and shows that such dumping can be ‘reciprocal’ — that is, there may be two-way trade in the same product. Reciprocal dumping is shown to be possible for a fairly general specification of firm behaviour. The welfare effects of this seemingly pointless trade are ambiguous. On the one hand, resources are wasted in the cross-handling of goods: on the other hand, increased competition reduces monopoly distortions. Surprisingly, in the case of free entry and Cournot behaviour reciprocal dumping is unambiguously beneficial.