Gains from Trade in Differentiated Products: Japanese Compact Trucks

Abstract

We present a methodology for estimating the welfare gains from a product with new characteristics, and apply it to Japanese and American compact trucks. Our approach can be used on any products for which a hedonic regression can be estimated. For 1979-80 we find average welfare gains of $500-600 per Japanese truck. In later years the benefit to consumers is reduced by the tariff on imports and the introduction of American compact models. American compacts have consumer gains which are much less than the average for Japanese models, since for each American compact there is an import with very similar characteristics.