The Chain Effect of an Antidumping Policy

Abstract

This article uses a successive duopoly model to show that some antidumping retaliation may in fact be a chain effect of an antidumping policy. Findings present that if dumping initially takes place in the home countrys final good market, then antidumping protection in the final good market will result in dumping in the foreign countrys input market, thus leading to further antidumping protection, which will reinforce the incentive of the home downstream firm to initially petition for antidumping protection. Moreover, we demonstrate that an antidumping duty in vertically related markets may not provide this industry with adequate protection. Finally, when taking the antidumping chain effect into account, we show that the government which initially faces the dumping may determine a higher antidumping duty if the production inefficiency of the home upstream firm relative to the foreign upstream firm is in the medium range.

Endogenous timing, strategic tariff game and bilateral trade in vertical oligopoly

“…As a result, in the present model, we concentrate on a strategic tariff game in the upstream rather than the downstream markets or both markets. In literature, Kao and Mai (2018) found similar results—antidumping protection in the final good market taken by the home country will result in further trade deterioration and antidumping retaliation in the foreign market.…”