Import Share under International Oligopoly with Differentiated Products: Japanese Imports in U.S. Manufacturing

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Abstract
This paper seeks to identify the determinants of the Japanese import share in the U.S. market. From the assumptions of international oligopoly and internationally differentiated products, a theoretical model is developed where import share is considered as a Cournot-Nash equilibrium. The relative position of the reaction functions is determined by the previous commitments of both domestic and foreign firms on advertising, R & D and tangible investment, as well as by artificial and natural trade barriers. Using a sample of 24 3-digit import-competing U.S. industries matched to Japanese industries, the empirical analysis provides evidence supporting the model's predictions that the relative strategic expenditures and market structures of both partners explain the Japanese import share in U.S. markets.

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