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Are Antidumping Duties an Antidote for Predation?

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  • Stefan Lutz

    ()

  • James Gaisford

    ()

  • Shan (Victor) Jiang

Abstract

Since price discrimination and selling below cost arise in the normal course of business and are usually legal for home firms, countering these practices by foreign firms provides a very weak rationale for antidumping duties. If antidumping duties were to provide a systematic defense against predation by foreign firms, however, a strong ''fair-trade'' justification would remain. This paper adapts the classic entry-deterrence analysis of Dixit (1979) and Brander and Spencer (1981) to provide a simple treatment of predation, which is applicable with price leadership as well as quantity leadership. Although situations of cross-border predation appear to be quite rare, foreign firms may sometimes find themselves in leadership positions if they have to make shipments and/or set prices before their home rivals. This paper shows that, in the context of such an international leadership game, predation ma y occur without dumping and vice versa. Further, when dumping and predation do coexist, a sophisticated form of antidumping duty would prevent predation, but the simple antidumping duties that are generally observed in practice will often be insufficient. Consequently, the paper challenges the ''fair-trade'' view of antidumping policy as an antidote for predation and strengthens the foundation of the counter-argument that antidumping constitutes a new insidious form of protectionism and trade harassment, which is of particularly serious concerns for small countries.

Suggested Citation

  • Stefan Lutz & James Gaisford & Shan (Victor) Jiang, 2009. "Are Antidumping Duties an Antidote for Predation?," ICER Working Papers 17-2009, ICER - International Centre for Economic Research.
  • Handle: RePEc:icr:wpicer:17-2009
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    References listed on IDEAS

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    1. James C. Hartigan, 1996. "Predatory Dumping," Canadian Journal of Economics, Canadian Economics Association, vol. 29(1), pages 228-239, February.
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    More about this item

    Keywords

    trade; duopoly; Stackelberg; Cournot; antidumping; predation;
    All these keywords.

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • 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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