Working Paper: CEPR ID: DP2624
Authors: Hylke Vandenbussche; Xavier Wauthy
Abstract: In this paper, we consider a European industry characterized by vertical product differentiation. Using a two-stage model with quality choice made before price competition takes place, we show that EU anti-dumping policy that takes the form of price-undertakings offers a powerful protection to domestic firms, but only at the price competition stage. Once the impact of the A-D policy on quality choices is taken into account, European Welfare as well as profits accruing to the domestic firm decrease whenever the free trade equilibrium is affected. Hence we show that European Antidumping policies may induce ?perverse? leapfrogging.
Keywords: Bertrand competition; European antidumping policy; injury; quality; welfare
JEL Codes: F13; L13
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Antidumping policy (F18) | Quality choices of firms (L15) |
| Price undertakings (L11) | Quality choices of firms (L15) |
| Quality choices of firms (L15) | Price competition (D41) |
| Quality choices of firms (L15) | European welfare (O52) |
| Antidumping policy (F18) | European welfare (O52) |
| Quality upgrade by foreign firm (F23) | Domestic firm surplus (D22) |
| Antidumping measures (F18) | Quality leadership reversal (L15) |