THE AMBIGUOUS CONSEQUENCES OF ANTIDUMPING LAWS

The anti-dumping law is most often applied in oligopolistic industries, while most analyses focus on the monopoly model. I analyze a duopoly model where a foreign firm engages in price-based dumping. Under Cournot behavior, the anti-dumping law has ambiguous price and welfare effects. When the home firm is a Stackleberg leader, two disquieting effects emerge. First, the home firm can use the anti-dumping law to curtail competition even when the foreign firm does not initially engage in dumping. Second, the anti-dumping law can increase profits of both firms at the expense of domestic consumers.