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Are antidumping duties an antidote for predation?


  • James Gaisford
  • Shan (Victor) Jiang
  • Stefan Lutz


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.
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Suggested Citation

  • James Gaisford & Shan (Victor) Jiang & Stefan Lutz, 2010. "Are antidumping duties an antidote for predation?," The School of Economics Discussion Paper Series 1013, Economics, The University of Manchester.
  • Handle: RePEc:man:sespap:1013

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    References listed on IDEAS

    1. James C. Hartigan, 1996. "Predatory Dumping," Canadian Journal of Economics, Canadian Economics Association, vol. 29(1), pages 228-239, February.
    2. Baldwin, Richard E., 1994. "The impact of the 1986 US--Japan semiconductor agreement," Japan and the World Economy, Elsevier, vol. 6(2), pages 129-152, June.
    3. Avinash Dixit, 1979. "A Model of Duopoly Suggesting a Theory of Entry Barriers," Bell Journal of Economics, The RAND Corporation, vol. 10(1), pages 20-32, Spring.
    4. James A. Brander & Barbara J. Spencer, 1981. "Tariffs and the Extraction of Foreign Monopoly Rents under Potential Entry," Canadian Journal of Economics, Canadian Economics Association, vol. 14(3), pages 371-389, August.
    5. Bruce A. Blonigen & Thomas J. Prusa, 2001. "Antidumping," NBER Working Papers 8398, National Bureau of Economic Research, Inc.
    6. Thomas J. Prusa, 2001. "On the spread and impact of anti-dumping," Canadian Journal of Economics, Canadian Economics Association, vol. 34(3), pages 591-611, August.
    7. Bruce A. Blonigen & Stephen E. Haynes, 2002. "Antidumping Investigations and the Pass-Through of Antidumping Duties and Exchange Rates," American Economic Review, American Economic Association, vol. 92(4), pages 1044-1061, September.
    8. Hartigan, James C., 1994. "Dumping and signaling," Journal of Economic Behavior & Organization, Elsevier, vol. 23(1), pages 69-81, January.
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    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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