Working Paper: NBER ID: w3016
Authors: Robert V. 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.
Keywords: Antidumping; Collusion; International Trade; Market Share
JEL Codes: F13; L41
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| introduction of domestic antidumping law (F18) | filing of antidumping suits (F18) |
| filing of antidumping suits (F18) | credible threat to foreign firms (F23) |
| credible threat to foreign firms (F23) | diminished incentives to defect from collusive price arrangements (D43) |
| diminished incentives to defect from collusive price arrangements (D43) | maintenance of higher collusive prices (D43) |
| introduction of domestic antidumping law (F18) | maintenance of higher collusive prices (D43) |