DP2624 European Antidumping Policy and Firms' Strategic Choice of Quality
|Author(s):||Hylke Vandenbussche, Xavier Wauthy|
|Publication Date:||November 2000|
|Keyword(s):||Bertrand Competition, European Antidumping Policy, Injury, Quality, Welfare|
|Programme Areas:||International Trade and Regional Economics|
|Link to this Page:||cepr.org/active/publications/discussion_papers/dp.php?dpno=2624|
In this paper, we consider a European industry characterized by vertical product differentiation. Using a two-stage model with quality choice made before price competition takes place, we show that EU anti-dumping policy that takes the form of price-undertakings offers a powerful protection to domestic firms, but only at the price competition stage. Once the impact of the A-D policy on quality choices is taken into account, European Welfare as well as profits accruing to the domestic firm decrease whenever the free trade equilibrium is affected. Hence we show that European Antidumping policies may induce ?perverse? leapfrogging.