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Strategic Use of Antidumping Law to Enforce Tacit International Collusion

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  • Robert W. Staiger
  • Frank A. Wolak

Abstract

We consider the impact of domestic antidumping law in a two-country partial equilibrium model where domestic and foreign firms tacitly collude in the domestic market. Firms engage in an infinitely repeated game, with each period composed of a two-stage game. In the first stage each firm chooses capacity before stochastic domestic demand is realized. In the second stage, after demand is realized, each firm then sets price. We show that the introduction of domestic antidumping law typically leads to the filing of antidumping suits by the domestic industry in low demand states. and to more successful collusion and greater market share for domestic firms during periods of low demand as a result. This occurs in spite of the fact that antidumping duties are never actually imposed. That is, the entire effect of antidumptng law comes in the form of a threat to punish foreign firms with a duty if they should "misbehave." Such a threat is made credible by filing a suit and, because it is credible, never has to be implemented. We conclude that the trade-restricting effects of antidumping law may have little to do with whether duties are actually imposed.

Suggested Citation

  • Robert W. Staiger & Frank A. Wolak, 1989. "Strategic Use of Antidumping Law to Enforce Tacit International Collusion," NBER Working Papers 3016, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:3016
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    Cited by:

    1. Aleksander Rutkowski, 2007. "Determinants of Withdrawals of Anti-Dumping Complaints in the EU," Journal of Economic Policy Reform, Taylor and Francis Journals, vol. 10(2), pages 89-109.
    2. 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.
    3. Hylke Vandenbussche & Ziga Zarnic, 2006. "Did US Safeguard Protection on Steel Affect Market Power of European Steel Producers?," LICOS Discussion Papers 17606, LICOS - Centre for Institutions and Economic Performance, KU Leuven.
    4. Park, Soonchan, 2009. "The trade depressing and trade diversion effects of antidumping actions: The case of China," China Economic Review, Elsevier, vol. 20(3), pages 542-548, September.
    5. repec:bin:bpeajo:v:26:y:1994:i:1994-3:p:51-118 is not listed on IDEAS
    6. Anderson, Simon P. & Schmitt, Nicolas & Thisse, Jacques-Francois, 1995. "Who benefits from antidumping legislation?," Journal of International Economics, Elsevier, vol. 38(3-4), pages 321-337, May.
    7. Hoekman, Bernard, 1998. "Free trade and deep integration : antidumping and antitrust in regional agreements," Policy Research Working Paper Series 1950, The World Bank.
    8. Blonigen, Bruce A. & Liebman, Benjamin H. & Pierce, Justin R. & Wilson, Wesley W., 2013. "Are all trade protection policies created equal? Empirical evidence for nonequivalent market power effects of tariffs and quotas," Journal of International Economics, Elsevier, vol. 89(2), pages 369-378.
    9. Martin Theuringer & Pia Weiss, 2001. "Do Anti-Dumping Rules Facilitate the Abuse of Market Dominance?," International Trade 0108002, EconWPA.
    10. Baomin Dong, 2013. "Cost-Based Anti-dumping as a Repeated Game," The Economic Record, The Economic Society of Australia, vol. 89, pages 95-105, June.
    11. Dobrin R. Kolev & Thomas J. Prusa, 2002. "Dumping and Double Crossing: The (In)Effectiveness of Cost-Based Trade Policy under Incomplete Information," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 43(3), pages 895-918, August.
    12. Angelika Eymann & Ludger Schuknecht, 1996. "Antidumping Policy In The European Community: Political Discretion Or Technical Determination," Economics and Politics, Wiley Blackwell, vol. 8(2), pages 111-131, July.
    13. Aleksander Rutkowski, 2007. "Withdrawals of Anti-dumping Complaints in the EU: A Sign of Collusion," The World Economy, Wiley Blackwell, vol. 30(3), pages 470-503, March.
    14. Robert W. Staiger & Frank A. Wolak, 1994. "Measuring Industry-Specific Protection: Antidumping in the United States," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 25(1994 Micr), pages 51-118.
    15. Staiger, Robert W. & Wolak, Frank A., 1992. "The effect of domestic antidumping law in the presence of foreign monopoly," Journal of International Economics, Elsevier, vol. 32(3-4), pages 265-287, May.
    16. Thomas J. Prusa, 1997. "The Trade Effects of U.S. Antidumping Actions," NBER Chapters,in: The Effects of U.S. Trade Protection and Promotion Policies, pages 191-214 National Bureau of Economic Research, Inc.
    17. Wilfried Pauwels & Hylke Vandenbussche & Marcel Weverbergh, 2001. "Strategic Behaviour under European Antidumping Duties," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 8(1), pages 75-99.
    18. Danny Leipziger & Hyun Shin, 1991. "The demand for protection: A look at antidumping cases," Open Economies Review, Springer, vol. 2(1), pages 27-38, February.
    19. Chad P. Bown & Rachel McCulloch, 2012. "Antidumping and Market Competition: Implications for Emerging Economies," Working Papers 50, Brandeis University, Department of Economics and International Businesss School.
    20. repec:wsi:serxxx:v:56:y:2011:i:02:n:s0217590811004183 is not listed on IDEAS
    21. Aradhna Aggrawal, 2003. "The WTO antidumping code: Issues for review in Post-Doha negotiations," Indian Council for Research on International Economic Relations, New Delhi Working Papers 99, Indian Council for Research on International Economic Relations, New Delhi, India.
    22. James Nieberding, 1999. "The Effect of U.S. Antidumping Law on Firms' Market Power: An Empirical Test," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 14(1), pages 65-84, February.
    23. Bruce A. Blonigen & Thomas J. Prusa, 2001. "Antidumping," NBER Working Papers 8398, National Bureau of Economic Research, Inc.

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