Resource title

Anti-dumping, intra-industry trade and quality reversals

Resource image

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Resource description

We examine an export game where two firms (home and foreign), located in two different countries, produce vertically differentiated products. The foreign firm is the most efficient in terms of R&D costs of quality development and the foreign country is relatively larger and endowed with a relatively higher income. The unique (risk-dominant) Nash equilibrium involves intra-industry trade where the foreign producer manufactures a good of higher quality than the domestic firm. This equilibrium is characterized by unilateral dumping by the foreign firm into the domestic economy. Two instruments of anti-dumping (AD) policy are examined, namely, a price undertaking (PU) and an anti-dumping duty. We show that, when firms? cost asymmetries are low and countries differ substantially in size, a PU leads to a quality reversal in the international market, which gives a rationale for the domestic government to enact AD law. We also establish an equivalence result between the effects of an AD duty and a PU.

Resource author

José Luis Moraga-González, Jean-Marie Viaene

Resource publisher

Resource publish date

Resource language

eng

Resource content type

text/html

Resource resource URL

http://hdl.handle.net/10419/18728

Resource license

Adapt according to the presented license agreement and reference the original author.