Working Paper: CEPR ID: DP1469
Authors: Reinhilde Veugelers; Hylke Vandenbussche
Abstract: This paper is the first to study the effect of European antidumping policy on market structure, i.e. the incentives for firms to engage in a domestic or international cartel in a multi-stage setting. The analysis concentrates on how European antidumping policy influences the incentives for firms to collude domestically or internationally. We tackle the question of whether antidumping regulation helps to establish, maintain or rather endanger full cartels as well as cartels restricted to domestic firms only. Our findings suggest that antidumping legislation can both have a pro-competitive or an anti-competitive effect. Which case prevails depends crucially on the welfare objective function used by the European government and also on the cost asymmetry and the degree of product heterogeneity between domestic and foreign firms. In addition to market structure we also discuss welfare effects. We find that antidumping measures are capable of both increasing or decreasing total community welfare depending on the type of measures installed.
Keywords: antidumping regulation; market structure; rent-shifting; welfare
JEL Codes: F13; L13; L41
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| European antidumping policy (F18) | market structure (D49) |
| government's welfare objectives (H53) | market structure outcomes (L11) |
| antidumping measures (F18) | collusion incentives (D43) |
| antidumping measures (F18) | competition among firms (L13) |
| cost asymmetry and product differentiation (L15) | collusion among firms (L12) |
| high product differentiation and limited cost differences (L15) | increased competition (L13) |