Inefficient Trade Patterns: Excessive Trade, Cross-Hauling, and Dumping

Abstract

I study an example of a competitive environment in which trade occurs in a sequential manner. In this example, a country with a stable demand may suffer from trade with a country with unstable demand, there may be too much trade, a country may import and export the same good in the same period (cross-hauling) and dumping may occur. The assumption about the timing of delivery is critical for our results. When delivery occurs before trade (delivery to stocks) trade improves welfare, there is dumping but no cross-hauling. When delivery occurs after trade (delivery to order), trade may reduce welfare, cross-hauling may occur but dumping does not occur.