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

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 dom estic or international cartel of implicit collusion in a multi-stage settin g and concentrate on how European antidumping policy influences the incenti ves for firms to collude domestically or internationally. The question whet her antidumping regulation helps to establish, maintain or rather endanger full cartels as well as cartels restricted to domestic firms only is tackle d. Our findings suggest that antidumping legislation can both have a procom petitive and an anticompetitive effect. Which case prevails depends crucial ly on the welfare objective function used by the European government and al so on the cost asymmetry and the degree of product heterogeneity between do mestic and foreign firms. In addition to market structure we also discuss w elfare effects. We find that antidumping measures are capable of both incre asing or decreasing total community welfare depending on the type of measur es installed. (C) 1998 Elsevier Science B.V. All rights reserved.