Persistent dumping, competition and welfare
In the case of persistent dumping, welfare effects are ambiguous. Therefore, the existing international trade theory cannot provide a clear rationale for policies to prohibit international price discrimination. Through a two-stage game on the endogenous foreign monopolist's dumping decision, this paper determines when persistent dumping will negatively affect the home country's total welfare in an oligopolistic domestic market in the absence of any anti-dumping duties. Key variables of interest in this research include: (i) production costs; (ii) the degree of substitutability among the products; and (iii) the number of domestic firms. With a linear demand and constant marginal cost functions, the model demonstrates that persistent dumping will reduce total welfare if the domestic market is relatively less concentrated, or if the products are close substitutes for each other.
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Volume (Year): 12 (2003)
Issue (Month): 1 ()
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