Are antidumping duties an antidote for predation?
AbstractSince 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.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Economics, The University of Manchester in its series The School of Economics Discussion Paper Series with number 1013.
Date of creation: 2010
Date of revision:
Contact details of provider:
Postal: Manchester M13 9PL
Phone: (0)161 275 4868
Fax: (0)161 275 4812
Web page: http://www.socialsciences.manchester.ac.uk/subjects/economics/
More information through EDIRC
Other versions of this item:
- F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
- F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
- L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-07-17 (All new papers)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Baldwin, Richard E., 1994. "The impact of the 1986 US--Japan semiconductor agreement," Japan and the World Economy, Elsevier, vol. 6(2), pages 129-152, June.
- James A. Brander & Barbara J. Spencer, 1981.
"Tariffs and the Extraction of Foreign Monopoly Rents under Potential Entry,"
Canadian Journal of Economics,
Canadian Economics Association, vol. 14(3), pages 371-89, August.
- James A. Brander & Barbara J. Spencer, 1980. "Tariffs and the Extraction of Foreign Monopoly Rents under Potential Entry," Working Papers 414, Queen's University, Department of Economics.
- Thomas J. Prusa, 2001.
"On the spread and impact of anti-dumping,"
Canadian Journal of Economics,
Canadian Economics Association, vol. 34(3), pages 591-611, August.
- Dixit, Avinash K., 1978.
"A Model of Duopoly Suggesting a Theory of Entry Barriers,"
The Warwick Economics Research Paper Series (TWERPS)
125, University of Warwick, Department of Economics.
- Avinash Dixit, 1979. "A Model of Duopoly Suggesting a Theory of Entry Barriers," Bell Journal of Economics, The RAND Corporation, vol. 10(1), pages 20-32, Spring.
- James C. Hartigan, 1996. "Predatory Dumping," Canadian Journal of Economics, Canadian Economics Association, vol. 29(1), pages 228-39, February.
- Hartigan, James C., 1994. "Dumping and signaling," Journal of Economic Behavior & Organization, Elsevier, vol. 23(1), pages 69-81, January.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Marianne Sensier).
If references are entirely missing, you can add them using this form.