Production Effects of Price- and Cost-Based Anti-Dumping Laws under Flexible Exchange Rates

Leidy, Michael P.; Hoekman, Bernard

doi:10.2307/135567

Cited by 26 publications

(15 citation statements)

References 15 publications

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“…A second alternative often used is a "cost-based" method where the dumping margin is the difference between a firm's (estimated) cost of production and its export price. Leidy and Hoekman (1990) show an important difference in the exporting firms optimal behavior to avoid an AD duty when having to adjust prices due to an adverse exchange rate shock. Under price-based AD law the firm can re-equalize prices after an exchange rate shock by both decreasing supply to raise prices in its export market and increasing supply (or dumping) to lower prices in its own home market, whereas, under cost-based AD law, adjustment must come from the supply to the export market only.…”

Section: The Cost Of the Prospect Of Ad Dutiesmentioning

confidence: 98%

“…One of the first papers in this literature, Leidy and Hoekman (1990) examines the production decisions of a single exporting firm with some degree of market power that faces possible AD protection against its exports and random exchange rate shocks. 12 The firm is assumed to have to make its production decision before the exchange rate is known.…”

Section: The Cost Of the Prospect Of Ad Dutiesmentioning

confidence: 99%

“…As mentioned earlier, one method often used is to define the dumping margin as the difference between the exporting firm's home price and its export price. Leidy and Hoekman (1990) call this "price-based AD law." A second alternative often used is a "cost-based" method where the dumping margin is the difference between a firm's (estimated) cost of production and its export price.…”

Section: The Cost Of the Prospect Of Ad Dutiesmentioning

confidence: 99%

“…Thus, we take two main messages from Leidy and Hoekman (1990). First, the prospect of AD protection increases exchange rate risk and foreign firms manage this risk by reducing export sales.…”

Section: The Cost Of the Prospect Of Ad Dutiesmentioning

confidence: 99%

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The Cost of Antidumping: the Devil is in the Details

Blonigen¹,

Prusa

2003

The Journal of Policy Reform

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Abstract:In this paper we argue that the costs of antidumping (AD) protection are substantially higher than standard tariff analysis would suggest. First, we argue that because AD duties are often adjusted during administrative reviews the welfare cost of AD duties increases over time. These adjustments effectively transfer heavily distorted AD revenue to foreign firms. Such transfers are especially costly in light of the fact that foreign firms have little scope to adjust their destination market prices. Second, we argue that AD duties are more costly than simply the visible costs of AD protection. There are significant additional costs associated with the prospect of protection and these costs are imposed on both the domestic economy and on the international trading community. These costs are created when foreign and domestic firms alter their standard profit maximizing behavior in order to influence the outcome of potential AD investigations. Although these costs cannot be measured, they may easily exceed the direct cost of AD duties.JEL classification: F13.

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Section: The Cost Of the Prospect Of Ad Dutiesmentioning

confidence: 98%

Section: The Cost Of the Prospect Of Ad Dutiesmentioning

confidence: 99%

Section: The Cost Of the Prospect Of Ad Dutiesmentioning

confidence: 99%

Section: The Cost Of the Prospect Of Ad Dutiesmentioning

confidence: 99%

See 2 more Smart Citations

The Cost of Antidumping: the Devil is in the Details

Blonigen¹,

Prusa

2003

The Journal of Policy Reform

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“…Various papers (see e.g. Ethier and Fisher, 1987;Fisher, 1992;Leidy and Hoekman, 1990;Reitzes, 1993) have examined how AD protection gives firms incentives to alter their price or output decisions vis-à-vis free trade in order to influence the AD outcome. This may lead to higher or lower welfare depending on the existing market structure.…”

Section: Related Literaturementioning

confidence: 99%

Antidumping, Intra‐industry Trade, and Quality Reversals

Moraga-González

Viaene

2015

Int Economic Review

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We examine an export game where two firms (home and foreign), located in two different countries, produce vertically differentiated products. The foreign firm is the most efficient in terms of R&D costs of quality development and the foreign country is relatively larger and endowed with a relatively higher income. The unique (risk-dominant) Nash equilibrium involves intra-industry trade and the foreign producer manufactures a good of higher quality than the domestic firm. For low enough transport costs, this equilibrium is characterized by unilateral dumping; otherwise, reciprocal dumping emerges. We show that the implementation of antidumping (AD) policy can change significantly the nature of the game and give rise to various new Nash equilibria. For some parameters, an AD policy leads to a quality reversal in the international market whereby the low-quality firm becomes leader. We show that such a policy is desirable for the implementing country, though world welfare decreases. The paper also establishes an equivalence result between a price undertaking and an anti-dumping duty.JEL Classification: F12, F13

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