European anti-dumping policy and the profitability of national and international collusion

Abstract

This paper is the first to study the effect of European antidumping policy on market structure. We analyze the incentives for firms to engage in a domestic or international cartel of implicit collusion in a multi-stage setting and concentrate on how European antidumping policy influences the incentives for firms to collude domestically or internationally. The question whether antidumping regulation helps to establish, maintain or rather endanger full cartels as well as cartels restricted to domestic firms only is tackled. Our findings suggest that antidumping legislation can both have a procompetitive and an anticompetitive effect. Which case 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 antidumping measures are capable of both increasing or decreasing total community welfare depending on the type of measures installed.