The Effect of Domestic Antidumping Law in the Presence of Foreign Monopoly

44 Pages Posted: 18 Apr 2007 Last revised: 24 May 2021

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: February 1990

Abstract

We consider the effects of antidumping law when utilized by competitive domestic petitioners against a foreign monopolist. The foreign monopolist must set capacity before the realization of random foreign demand, but can reduce the cost of holding excess capacity in periods of slack foreign demand by dumping on the domestic market. With the introduction of antidumping law in the domestic market, domestic firms are shown to file suits in periods of sufficiently slack foreign demand, reducing the volume of imports directly in such periods. Moreover, this occasional filing activity raises the cost to the foreign monopolist of holding excess capacity and, in so doing, results in a scaling back of foreign capacity. Thus, the volume of imports is generally reduced by the introduction of domestic antidumping law, even in periods where no suit is filed. Finally. we consider self-enforcing agreements between the domestic industry and the foreign monopolist that take the form of a promise by the domestic industry not to file in exchange for a promise by the foreign monopolist to export no more than a pre-specified amount: We show that these agreements narrow the range of demand states over which suits are filed to only the softest states of demand, and lead to greater foreign capacity, hence partially mitigating both the direct and indirect impact of antidumping law on trade volume.

Suggested Citation

Staiger, Robert W. and Wolak, Frank A., The Effect of Domestic Antidumping Law in the Presence of Foreign Monopoly (February 1990). NBER Working Paper No. w3254, Available at SSRN: https://ssrn.com/abstract=980903

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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