Intra-Industry Trade and Oligopoly: A Conjectural Variations Approach

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Abstract
This paper considers the welfare aspects of intra-industry trade with oligopolistic firms. The usual Cournot assumption about the behaviour of firms is relaxed, and a more general conjectural variations approach is adopted. Intra-industry trade takes place between identical economies. However, this may result in a decline in welfare of consumers, firms and the world. The paper also considers oligopolists reacting to imports into their home market by exporting. Under full retaliation in export markets, intra-industry trade lowers welfare.
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