A Simple Model of Foreign Brand Penetration with Multi-Product Firms



Trade liberalization through economic integration and decreasing transport and communication costs has resulted in increasing penetration of foreign brands, a phenomenon that has raised concerns among domestic producers. In fact, in the wake of trade liberalization, there has been not only a proliferation of foreign brands, but also a widening of varieties within each imported brand. This chapter addresses both of these phenomena, using a simple model of import penetration with competition among multi-product firms to analyze short run, medium run, and long run effects of decreased trade costs on product diversity (both in brand names and in varieties), relative prices, and relative profits.


Relative Price Trade Liberalization Trade Cost Domestic Firm Foreign Brand 


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© Springer India 2014

Authors and Affiliations

  1. 1.Graduate School of EconomicsKobe UniversityKobeJapan
  2. 2.Department of EconomicsMcGill UniversityMontrealCanada

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