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Dynamic Pricing in the Presence of Antidumping Policy: Theory and Evidence

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  • Bruce A. Blonigen
  • Jee-Hyeong Park

Abstract

Antidumping (AD) duties are calculated as the difference between the foreign firm's product price in the export market and some definition of 'normal' or 'fair' value, often the foreign firm's product price in its own market. Additionally, AD laws allow for recalculation of these AD duties over time in what are known as administrative reviews. This paper examines for the first time the resulting dynamic pricing problem of a foreign firm that faces such an AD trade protection policy in its export market. When AD duties are certain for any dumping that occurs, we obtain the surprising result that dumping and AD duties should increase over time toward a stationary equilibrium value. Adding uncertainties prevalent in AD enforcement into our analysis changes these conclusions substantially and leads to more realistic testable implications. Firms with ex ante expectations that the probability of AD enforcement is low, or with expectations that the probability of a termination/VER (instead of AD duties) is high, will decrease their dumping and AD duties over time in the administrative review process once they face AD duties. Using detailed data from U.S. AD investigations filed from 1980-1995, we find evidence consistent with these hypotheses stemming from our analysis with uncertain AD enforcement and provide empirical evidence consistent with James Anderson's domino dumping hypothesis.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 8477.

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Date of creation: Sep 2001
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Publication status: published as Blonigen, Bruce A. and Jee-Hyeong Park. "Dynamic Pricing In The Presence Of Antidumping Policy: Theory And Evidence," American Economic Review, 2004, v94(1,Mar), 134-154.
Handle: RePEc:nbr:nberwo:8477

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  1. Bruce A. Blonigen & Jee-Hyeong Park, 2001. "Dynamic Pricing in the Presence of Antidumping Policy: Theory and Evidence," NBER Working Papers 8477, National Bureau of Economic Research, Inc.
  2. James E. Anderson, 1993. "Domino Dumping, II: Anti-dumping," Boston College Working Papers in Economics 219, Boston College Department of Economics.
  3. Robert W. Staiger & Frank A. Wolak, 1990. "The Effect of Domestic Antidumping Law in the Presence of Foreign Monopoly," NBER Working Papers 3254, National Bureau of Economic Research, Inc.
  4. J.M. Finger, 1981. "The Industry-Country Incidence of "Less than Fair Value" Cases in US Import Trade," NBER Chapters, in: Export Diversification and the New Protectionism: The Experience of Latin America, pages 260-279 National Bureau of Economic Research, Inc.
  5. Thomas Prusa & Michael Knetter, 2000. "Macroeconomic Factors and Antidumping Filings: Evidence from Four Countries," Departmental Working Papers 200023, Rutgers University, Department of Economics.
  6. Maurizio Zanardi, 2000. "Antidumping Law as a Collusive Device," Boston College Working Papers in Economics 487, Boston College Department of Economics.
  7. Barry J. Eichengreen & Hans Van der Ven, 1985. "U.S. Antidumping Policies: The Case of Steel," NBER Working Papers 1098, National Bureau of Economic Research, Inc.
  8. Robert W. Staiger & Frank A. Wolak, 1994. "Measuring Industry Specific Protection: Antidumping in the United States," NBER Working Papers 4696, National Bureau of Economic Research, Inc.
  9. Wendy L. Hansen & Thomas J. Prusa, 1995. "Cumulation and ITC Decision-Making: The Sum of the Parts is Greater thanthe Whole," NBER Working Papers 5062, National Bureau of Economic Research, Inc.
  10. Bruce A. Blonigen & Stephen E. Haynes, 2002. "Antidumping Investigations and the Pass-Through of Antidumping Duties and Exchange Rates," American Economic Review, American Economic Association, vol. 92(4), pages 1044-1061, September.
  11. Prusa, Thomas J., 1992. "Why are so many antidumping petitions withdrawn?," Journal of International Economics, Elsevier, vol. 33(1-2), pages 1-20, August.
  12. Feinberg, Robert M. & Hirsch, Barry T., 1989. "Industry rent seeking and the filing of unfair trade complaints," International Journal of Industrial Organization, Elsevier, vol. 7(3), pages 325-340.
  13. Finger, J M & Hall, H Keith & Nelson, Douglas R, 1982. "The Political Economy of Administered Protection," American Economic Review, American Economic Association, vol. 72(3), pages 452-66, June.
  14. Corinne M. Krupp & Patricia S. Pollard, 1996. "Market Responses to Antidumping Laws: Some Evidence from the U.S. Chemical Industry," Canadian Journal of Economics, Canadian Economics Association, vol. 29(1), pages 199-227, February.
  15. Pagan, Adrian, 1984. "Econometric Issues in the Analysis of Regressions with Generated Regressors," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 25(1), pages 221-47, February.
  16. Anderson, James E, 1992. "Domino Dumping, I: Competitive Exporters," American Economic Review, American Economic Association, vol. 82(1), pages 65-83, March.
  17. Wendy L. Hansen & Thomas J. Prusa, 1996. "The Economics and Politics of Trade Policy: An Empirical Analysis of ITC Decision Making," Departmental Working Papers 199621, Rutgers University, Department of Economics.
  18. Krupp, Corinne, 1994. "Antidumping Cases in the U.S. Chemical Industry: A Panel Data Approach," Journal of Industrial Economics, Wiley Blackwell, vol. 42(3), pages 299-311, September.
  19. Gallaway, Michael P. & Blonigen, Bruce A. & Flynn, Joseph E., 1999. "Welfare costs of the U.S. antidumping and countervailing duty laws," Journal of International Economics, Elsevier, vol. 49(2), pages 211-244, December.
  20. Moore, Michael O, 1992. "Rules or Politics? An Empirical Analysis of ITC Anti-dumping Decisions," Economic Inquiry, Western Economic Association International, vol. 30(3), pages 449-66, July.
  21. Blonigen, Bruce A. & Ohno, Yuka, 1998. "Endogenous protection, foreign direct investment and protection-building trade," Journal of International Economics, Elsevier, vol. 46(2), pages 205-227, December.
  22. Bruce A. Blonigen & Thomas J. Prusa, 2001. "Antidumping," NBER Working Papers 8398, National Bureau of Economic Research, Inc.
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