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European antidumping policy and firms’ strategic choice of quality

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  • VANDENBUSSCHE, Hylke

    (University of Antwerp, UFSIA and CEPR, London)

  • WAUTHY, Xavier

    (Facultes universitaires Saint-Louis, Bruxelles and Center for Operations Research and Econometrics (CORE), Université catholique de Louvain (UCL), Louvain la Neuve, Belgium)

Abstract

In this paper, we consider a European industry characterized by vertical product differentiation. Using a two-stage model with quality choice made before price competition takes place, we show that EU antidumping policy that takes the form of price-undertakings offers a powerful protection to domestic firms, but only at the price competition stage. Once the impact of the A-D policy on quality choices is taken into account, European Welfare as well as profits accruing to the domestic firm decrease whenever the free trade equilibrium is affected. Hence we show that European Antidumping policies may induce “perverse” leapfrogging

Suggested Citation

  • VANDENBUSSCHE, Hylke & WAUTHY, Xavier, 1999. "European antidumping policy and firms’ strategic choice of quality," LIDAM Discussion Papers CORE 1999016, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    • Handle: RePEc:cor:louvco:1999016
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    References listed on IDEAS

    as
    1. Wauthy, Xavier, 1996. "Quality Choice in Models of Vertical Differentiation," Journal of Industrial Economics, Wiley Blackwell, vol. 44(3), pages 345-353, September.
    2. Feenstra, Robert C., 1995. "Estimating the effects of trade policy," Handbook of International Economics, in: G. M. Grossman & K. Rogoff (ed.), Handbook of International Economics, edition 1, volume 3, chapter 30, pages 1553-1595, Elsevier.
    3. Veugelers, Reinhilde & Vandenbussche, Hylke, 1999. "European anti-dumping policy and the profitability of national and international collusion," European Economic Review, Elsevier, vol. 43(1), pages 1-28, January.
    4. Motta, Massimo, 1993. "Endogenous Quality Choice: Price vs. Quantity Competition," Journal of Industrial Economics, Wiley Blackwell, vol. 41(2), pages 113-131, June.
    5. Ulrich Lehmann-Grube, 1997. "Strategic Choice of Quality When Quality is Costly: The Persistence of the High-Quality Advantage," RAND Journal of Economics, The RAND Corporation, vol. 28(2), pages 372-384, Summer.
    6. Mussa, Michael & Rosen, Sherwin, 1978. "Monopoly and product quality," Journal of Economic Theory, Elsevier, vol. 18(2), pages 301-317, August.
    7. Konings, Jozef & Vandenbussche, Hylke & Veugelers, Reinhilde, 1998. "Union Wage Bargaining and European Antidumping Policy in Imperfectly Competitive Markets," CEPR Discussion Papers 1860, C.E.P.R. Discussion Papers.
    8. Herguera, Iñigo & Lutz, Stefan, 1997. "Trade policy and leapfrogging," UC3M Working papers. Economics 7214, Universidad Carlos III de Madrid. Departamento de Economía.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Bertrand competition; injury; quality; Welfare; European antidumping policy;
    All these keywords.

    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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