Reciprocal dumping under dichotomous regulation
Sébastien Debia – HEC Montréal, Canada
We develop a two-player-international-trade game where each player may freely export but have to sell at marginal cost in its local market. We consider a setting where local production is decided after exports. In the symmetric game, the equilibrium is Pareto-dominated by the competitive benchmark. We characterize the necessary conditions for the asymmetric equilibrium to be of two-way trade.
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