Working Paper

Antidumping policy under imperfect competition

Abstract: As average tariff rates have fallen, countries have increasingly turned to GATT-sanctioned ``special protection'' - especially antidumping duties - to restrict imports when import volumes increase suddenly. In this paper, I analyze a model of dumping among imperfectly competitive firms that face stochastic demand. I show that an antidumping duty can improve an importing-country's welfare when it faces dumping caused by weak foreign demand. Interestingly, the antidumping duty does not completely stem the tide of dumped imports, but it improves welfare through shifting some of the dumping firm's rents to the home country. Even when faced with an antidumping duty, a foreign firm that serves more than one market will prefer dumping and paying an antidumping duty over negotiating a voluntary export restraint because dumping allows it to earn higher revenues in its own market.

Keywords: Antidumping duties;

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Bibliographic Information

Provider: Federal Reserve Bank of Chicago

Part of Series: Working Paper Series

Publication Date: 2001

Number: WP-01-21