Are Antidumping Duties an Antidote for Predation?

Stefan Lutz, James Gaisford () and Shan (Victor) Jiang

ICER Working Papers from ICER - International Centre for Economic Research

Abstract: Since price discrimination and selling below cost arise in the normal course of business and are usually legal for home firms, countering these practices by foreign firms provides a very weak rationale for antidumping duties. If antidumping duties were to provide a systematic defense against predation by foreign firms, however, a strong ''fair-trade'' justification would remain. This paper adapts the classic entry-deterrence analysis of Dixit (1979) and Brander and Spencer (1981) to provide a simple treatment of predation, which is applicable with price leadership as well as quantity leadership. Although situations of cross-border predation appear to be quite rare, foreign firms may sometimes find themselves in leadership positions if they have to make shipments and/or set prices before their home rivals. This paper shows that, in the context of such an international leadership game, predation ma y occur without dumping and vice versa. Further, when dumping and predation do coexist, a sophisticated form of antidumping duty would prevent predation, but the simple antidumping duties that are generally observed in practice will often be insufficient. Consequently, the paper challenges the ''fair-trade'' view of antidumping policy as an antidote for predation and strengthens the foundation of the counter-argument that antidumping constitutes a new insidious form of protectionism and trade harassment, which is of particularly serious concerns for small countries.

Keywords: trade; duopoly; Stackelberg; Cournot; antidumping; predation (search for similar items in EconPapers)
JEL-codes: F12 F13 L13 (search for similar items in EconPapers)
Pages: 37 pages
Date: 2009-07
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Related works:
Working Paper: Are antidumping duties an antidote for predation? (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:icr:wpicer:17-2009

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