Pricing Behavior in the Presence of Antidumping Law

Pricing Behavior in the Presence of Antidumping Law

This paper examines the effect of antidumping (AD) law on the pricing behavior of foreign and domestic firms prior to the filing of an AD action. AD law affects firms in very different ways-almost always distorting the foreign firm`s strategy but often not altering the domestic firm`s. We show that AD law creates a price floor for the foreign firm and causes it to raise its price. The domestic firm`s response is significantly more complicated, in many instances resulting in feigned injury. These diverse effects imply that AD law has important welfare consequences even if duties are never levied.