Antidumping as Strategic Trade Policy Under Asymmetric Information
AbstractIn the last two decades, trade liberalization under GATT/WTO has been partly offset by an increase in antidumping protection. Economists have argued convincingly that this is partly due to the inclusion of sales below cost in the definition of dumping during the GATT Tokyo Round. The introduction of the cost- based dumping definition gives regulating authorities a better opportunity to choose protection according to their liking. This paper investigates the domestic government's antidumping duty choice in an asymmetric information framework where the foreign firm's cost is observed by the domestic firm, but not by the government. To induce truthful revelation, the government can design a tariff schedule, contingent on firms' cost reports, accompanied by a threat to collect additional information for report verification (i.e., auditing) and, in case misreporting is detected, to set penalty duties. We show that depending on the concrete assumptions, the domestic government may not only be able to extract the true cost information, but also succeeds in implementing the full-information, governmental welfare-maximizing duty. In this case, the antidumping framework within GATT/WTO does not only offer the means to pursue strategic trade policy disguised as fair trade policy, but it also helps overcome the informational problems with regard to correctly determining the optimal strategic trade policy.
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 University of Connecticut, Department of Economics in its series Working papers with number 2008-19.
Length: 35 pages
Date of creation: Jun 2008
Date of revision: Jan 2010
Contact details of provider:
Postal: University of Connecticut 341 Mansfield Road, Unit 1063 Storrs, CT 06269-1063
Phone: (860) 486-4889
Fax: (860) 486-4463
Web page: http://www.econ.uconn.edu/
More information through EDIRC
antidumping duties; asymmetric information; trade protection; strategic trade policy.;
Other versions of this item:
- Xenia Matschke & Anja Schöttner, 2013. "Antidumping as Strategic Trade Policy under Asymmetric Information," Southern Economic Journal, Southern Economic Association, vol. 80(1), pages 81-105, July.
- Xenia Matschke & Anja Schöttner, 2009. "Antidumping as Strategic Trade Policy Under Asymmetric Information," CESifo Working Paper Series 2536, CESifo Group Munich.
- F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
This paper has been announced in the following NEP Reports:
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.:
- James A. Brander & Barbara J. Spencer, 1984.
"Export Subsidies and International Market Share Rivalry,"
NBER Working Papers
1464, National Bureau of Economic Research, Inc.
- 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.
- 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
- 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.
- Dobrin R. Kolev & Thomas J. Prusa, 1999. "Dumping and Double Crossing: The (In)Effectiveness of Cost-Based Trade Policy Under Incomplete Information," NBER Working Papers 6986, National Bureau of Economic Research, Inc.
- Thomas J. Prusa & Dobrin Kolev, 1999. "Dumping and Double Crossing: The (In)Effectiveness Of Cost-Based Trade Policy Under Incomplete Information," Departmental Working Papers 199901, Rutgers University, Department of Economics.
- Bruce A. Blonigen, 2002.
"Evolving Discretionary Practices of U.S. Antidumping Activity,"
University of Oregon Economics Department Working Papers
2003-20, University of Oregon Economics Department, revised 01 Aug 2003.
- 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.
- Bruce A. Blonigen, 2003. "Evolving Discretionary Practices of U.S Antidumping Activity," NBER Working Papers 9625, National Bureau of Economic Research, Inc.
- Michael Owen Moore & Alan Fox, 2008.
"Why Don't Foreign Firms Cooperate in U.S. Antidumping Investigations?: An Emperical Analysis,"
2008-17, The George Washington University, Institute for International Economic Policy.
- 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.
- Dixit, Avinash, 1984. "International Trade Policy for Oligopolistic Industries," Economic Journal, Royal Economic Society, vol. 94(376a), pages 1-16, Supplemen.
- Bruce A. Blonigen & Thomas J. Prusa, 2001. "Antidumping," NBER Working Papers 8398, National Bureau of Economic Research, Inc.
- 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.
- 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.
- 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.
- Phillip McCalman & Frank Stähler & Gerald Willmann, 2011. "Contingent Trade Policy and Economic Efficiency," CESifo Working Paper Series 3424, CESifo Group Munich.
- Phillip McCalman & Frank Stähler & Gerald Willmann, 2013. "Contingent Trade Policy and Economic Efficiency," Kiel Working Papers 1853, Kiel Institute for the World Economy.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Kasey Kniffin).
If references are entirely missing, you can add them using this form.