Cross-Product and Cross-Market Adjustments Within Multiproduct Firms: Evidence from Antidumping Actions

Abstract

Multiproduct firms are responsible for the vast majority of global trade. A prior literature examines how multiproduct firms respond to trade liberalizations that simultaneously affect all of the firms' products and inputs. In contrast, our study uses Chinese firm-product-level export data to examine how an AD action, a very targeted trade policy against a specific product in a specific export destination, affects a multiproduct firms' price and quantity decisions across its other products and export destinations. We find robust evidence for a new phenomenon we call within-firm cross-product trade deflection whereby an AD duty against one of the firm's products in one of its export destinations is associated with reduced prices and increased sales of its other products across all markets. This type of effect depends on increasing costs from joint production within multiproduct firms, something that is often assumed away in many models of the multiproduct firm. We also document for the first time a within-firm chilling effect whereby an AD action in one export destination on a product leads the firm to raise price and lower quantity of the product in other export destinations to lower the risk of AD actions in these other markets.