Non-Duty Effects and a Strategic Use of Antidumping Petition

Abstract This paper considers a signaling game in which the non-duty effects of antidumping petition influence filing motivations behind the domestic firm’s filing strategies. In this game, “abusive†antidumping occurs when the domestic firm files petitions strategically so as to take advantage of private information regarding its filing motivations, which can be made possible when a pooling or a semi-separating equilibrium is obtained. A strategic use of antidumping takes place when the outcome filer happens to be a high-cost type instead of a low-cost type. In this case, no separating equilibrium exists, in which the outcome filer files and the process filer withdraws. The outcome filer may make so much efforts that its payoff net of petitioning expenses could be less than that it can obtain by withdrawing. Or the process filer may spend so little that its payoff for not filing could not be greater than that for filing. The possibility of abusive antidumping, a pooling or a semi-separating equilibrium, depends on the probability that the domestic firm is an outcome (or a process) filer, the expected loss that the foreign exporter might suffer due to antidumping, the initial profits that the foreign exporter earns in the home market, the cost competitiveness of the domestic firm, the initial sales to the home market, and the effects of a VER on the foreign exporter’s reaction function. The existence of a pooling equilibrium shows why there are so many antidumping petitions, many of which come from outdated, less competitive industries.