European Anti-Dumping Policy and the Profitability of National and International Collusion

Abstract

This paper is the first to study the effect of European Anti-dumping policy on market structure, i.e., the incentives of firms to engage in a domestic or international cartel in a multi-stage setting. The analysis concentrates on how European anti-dumping policy influences the incentives for firms to collude domestically or internationally. We tackle the question of whether anti-dumping regulation helps to establish, maintain or endanger full international cartels as well as cartels restricted to domestic firms only. Our findings suggest that European anti-dumping legislation can have both a pro-competitive and an anti-competitive effect. Which effect prevails depends crucially on the welfare objective function used by the European government and also on the cost-asymmetry and the degree of product heterogeneity between domestic and foreign firms. In addition to market structure, we also discuss welfare effects. We find that anti-dumping measures are capable of both increasing and decreasing total European Community welfare, depending on the type of measures installed.