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Antidumping as Strategic Trade Policy under Asymmetric Information

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  • Xenia Matschke

    ()
    (Fachbereich IV-VWL, Universität Trier and CESifo, Universitätsring 15, 54296 Trier, Germany; corresponding author.)

  • Anja Schöttner

    ()
    (Department of Economics, University of Konstanz, PO-Box 144, 78457 Konstanz, Germany;)

Abstract

Trade liberalization under GATT/World Trade Organization (WTO) has been partly offset by an increase in antidumping protection, possibly due to the inclusion of sales below cost in the definition of dumping. This article investigates the domestic government's antidumping duty choice in an asymmetric information framework, in which the foreign firm's cost is observed by the domestic firm, but not by the government. We show that by designing a tariff schedule contingent on firms' cost reports and accompanied by a threat to collect additional information for report verification, the domestic government may not only be able to extract the true cost information, but also succeed in implementing the full-information, governmental welfare-maximizing duty. The antidumping framework within GATT/WTO may thus not only offer the means to pursue strategic trade policy disguised as fair trade policy, but it also helps overcome informational problems with regard to correctly determining the optimal strategic trade policy.

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File URL: http://dx.doi.org/10.4284/0038-4038-2010.028
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Bibliographic Info

Article provided by Southern Economic Association in its journal Southern Economic Journal.

Volume (Year): 80 (2013)
Issue (Month): 1 (July)
Pages: 81-105

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Handle: RePEc:sej:ancoec:v:80:1:y:2013:p:81-105

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  1. Bruce A. Blonigen, 2006. "Evolving discretionary practices of U.S. antidumping activity," Canadian Journal of Economics, Canadian Economics Association, vol. 39(3), pages 874-900, August.
  2. Dobrin R. Kolev & Thomas J. Prusa, 2002. "Dumping and Double Crossing: The (In)Effectiveness of Cost-Based Trade Policy under Incomplete Information," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 43(3), pages 895-918, August.
  3. Bruce A. Blonigen & Thomas J. Prusa, 2001. "Antidumping," NBER Working Papers 8398, National Bureau of Economic Research, Inc.
  4. Leonard K. Cheng & Larry D. Qiu & Kit Pong Wong, 2001. "Anti-dumping measures as a tool of protectionism: A mechanism design approach," Canadian Journal of Economics, Canadian Economics Association, vol. 34(3), pages 639-660, August.
  5. Philippe Kohler & Michael O. Moore, 2001. "Injury-Based Protection with Auditing under Imperfect Information," Southern Economic Journal, Southern Economic Association, vol. 68(1), pages 42-59, July.
  6. Brander, James A., 1995. "Strategic trade policy," Handbook of International Economics, in: G. M. Grossman & K. Rogoff (ed.), Handbook of International Economics, edition 1, volume 3, chapter 27, pages 1395-1455 Elsevier.
  7. Brander, James A. & Spencer, Barbara J., 1985. "Export subsidies and international market share rivalry," Journal of International Economics, Elsevier, vol. 18(1-2), pages 83-100, February.
  8. Dixit, Avinash, 1984. "International Trade Policy for Oligopolistic Industries," Economic Journal, Royal Economic Society, vol. 94(376a), pages 1-16, Supplemen.
  9. Michael Moore & Alan Fox, 2010. "Why don’t foreign firms cooperate in US antidumping investigations? An empirical analysis," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 145(4), pages 597-613, January.
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Cited by:
  1. Phillip McCALMAN & Frank STÄHLER & Gerald WILLMANN, 2011. "Contingent trade policy and economic efficiency," Center for Economic Studies - Discussion papers ces11.05, Katholieke Universiteit Leuven, Centrum voor Economische Studiën.

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