Strategic Use of Private Information and Antidumping Petition

This paper considers a signaling game in which an import competing firm files antidumping petition against its foreign competitor in its own market in order to secure the non-duty effects. In this game, "abusive" antidumping occurs when the domestic firm files petition strategically, as it takes advantage of private information regarding its filing motivations. A strategic use of antidumping can be made possible when a pooling or a semi-separating equilibrium is obtained, which takes place when the outcome filer happens to be a high-cost type. In this case, no separating equilibrium exists, in which the outcome filer files and the process filer withdraws. That is, the outcome filer may make so much efforts that its payoff net of petitioning expenses can be less than that it can obtain by withdrawing. Or the process filer may spend so little that its payoff for not filing cannot be greater than that for filing. This possibility of abusive antidumping, a pooling or a semi-separating equilibrium, depends on the probability that the domestic firm is an outcome (or a process) filer, the expected loss that the foreign exporter might suffer due to antidumping, the initial profits that the foreign exporter earns in the home market, the cost competitiveness of the domestic firm, the initial sales to the home market, and the effects of a VER on the foreign exporter's reaction function. The existence of a pooling equilibrium shows why there are so many antidumping petitions, many of which come from outdated, less competitive industries.