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Injury-Based Protection with Auditing under Imperfect Information

Author

Listed:
  • Philippe Kohler

    (Department of Economics, University of Paris)

  • Michael O. Moore

    () (Department of Economics/Elliott School, George Washington University)

Abstract

We analyze optimal protection when a benevolent government must maintain nonnegative domestic profits and when the domestic import-competing firm has private information about its costs. A costly audit mechanism can deter strategic manipulation of this private information. We show that a high penalty/low probability of investigation is optimal when the shadow price of the firm profit is low compared with the audit cost. A low penalty/high probability of investigation is optimal when there is a low investigation cost and a high shadow price of firm profit. In this latter case, the trade authority obtains truthful announcements by directly auditing the firm.

Suggested Citation

  • 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.
  • Handle: RePEc:sej:ancoec:v:68:1:y:2001:p:42-59
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    Cited by:

    1. 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.
    2. Blonigen, Bruce A., 2006. "Working the system: Firm learning and the antidumping process," European Journal of Political Economy, Elsevier, vol. 22(3), pages 715-731, September.
    3. Moore, Michael O., 2005. ""Facts available" dumping allegations: when will foreign firms cooperate in antidumping petitions?," European Journal of Political Economy, Elsevier, vol. 21(1), pages 185-204, March.
    4. François Tandé, 2006. "Taxes antidumping et règle des faits disponibles," Revue économique, Presses de Sciences-Po, vol. 57(5), pages 1053-1063.
    5. Bruce A. Blonigen & Thomas J. Prusa, 2001. "Antidumping," NBER Working Papers 8398, National Bureau of Economic Research, Inc.

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