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THE AMBIGUOUS CONSEQUENCES OF ANTI‐DUMPING LAWS
Author(s) -
WEBB MICHAEL
Publication year - 1992
Publication title -
economic inquiry
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.823
H-Index - 72
eISSN - 1465-7295
pISSN - 0095-2583
DOI - 10.1111/j.1465-7295.1992.tb01973.x
Subject(s) - dumping , cournot competition , economics , duopoly , monopoly , oligopoly , competition (biology) , welfare , microeconomics , market economy , international economics , law , international trade , ecology , political science , biology
The anti‐dumping law is most often applied in oligopolistic industries, while most analyses focus on the monopoly model. I analyze a duopoly model where a foreign firm engages in price‐based dumping. Under Cournot behavior, the anti‐dumping law has ambiguous price and welfare effects. When the home firm is a Stackleberg leader, two disquieting effects emerge. First, the home firm can use the anti‐dumping law to curtail competition even when the foreign firm does not initially engage in dumping. Second, the anti‐dumping law can increase profits of both firms at the expense of domestic consumers.