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This paper presents an explanation about why foreign dumping occurs in a model of monopolistic competition with imperfect information. The domestic and foreign monopolistically competitive firms compe...te in the domestic market and adopt mixed pricing strategies. The foreign dumping is defined as the pricing below the minimum average cost in the domestic market. The presence of the consumers that search for the lowest price only of the domestic firms causes the foreign dumping. The paper predicts the probability of the foreign dumping in terms of the number of consumers ignorant of the existence of s foreign store. Of course, if such type of consumers were absent, the foreign dumping would never occur.show more
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