Strategic Effects of Antidumping Legislation in Europe
University of Antwerp
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European antidumping legislation takes into account two aspects in deciding whether
antidumping duties should be levied against offending importers.
The first is called the "dumping margin," which is modeled as the difference
between the relevant (exogenous) world-price level and the price charged in the target
country. The second is the "injury margin," which can be taken to be the price
difference relative to local competitors in the target market. If both margins are
positive, dumping (world price higher than price of import) and injury (price of import
lower than local price) are found, an antidumping duty can be levied. The amount of the
levy is taken to be the smallest of injury and dumping margins.
We analyze the strategic behavior of a local company and an importer who anticipate
possible levies as a result of their pricing behavior. This is modeled as a two-period
Cournot game, where the first period sets the conditions under which the second period
subgame will be played. The results indicate that the introduction of the injury margin
leads to markedly different strategies from the U.S. settings where the levy is based on
the dumping margin only (although both dumping and injury are prerequisites). In general,
while the amount of the levy may be lower because of the injury-margin criterion, the
impact on prices and quantities may be opposite to the case where the dumping margin alone
is the basis for the duty.