Strategic Use of Antidumping Law to Enforce Tacit International Collusion

43 Pages Posted: 4 Jul 2004 Last revised: 2 Apr 2010

See all articles by Robert W. Staiger

Robert W. Staiger

Stanford University; University of Wisconsin - Madison - Department of Economics; National Bureau of Economic Research (NBER)

Frank Wolak

National Bureau of Economic Research (NBER)

Date Written: June 1989

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.

Suggested Citation

Staiger, Robert W. and Wolak, Frank A., Strategic Use of Antidumping Law to Enforce Tacit International Collusion (June 1989). NBER Working Paper No. w3016, Available at SSRN: https://ssrn.com/abstract=227484

Robert W. Staiger (Contact Author)

Stanford University ( email )

Stanford, CA 94305
United States

University of Wisconsin - Madison - Department of Economics ( email )

1180 Observatory Drive
Madison, WI 53706
United States
608-262-2265 (Phone)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Frank A. Wolak

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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