Firm's behavior in the presence of antidumping laws

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1994
Authors
Khan, Nadeem
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Harvey E. Lapan
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Economics

The Department of Economic Science was founded in 1898 to teach economic theory as a truth of industrial life, and was very much concerned with applying economics to business and industry, particularly agriculture. Between 1910 and 1967 it showed the growing influence of other social studies, such as sociology, history, and political science. Today it encompasses the majors of Agricultural Business (preparing for agricultural finance and management), Business Economics, and Economics (for advanced studies in business or economics or for careers in financing, management, insurance, etc).

History
The Department of Economic Science was founded in 1898 under the Division of Industrial Science (later College of Liberal Arts and Sciences); it became co-directed by the Division of Agriculture in 1919. In 1910 it became the Department of Economics and Political Science. In 1913 it became the Department of Applied Economics and Social Science; in 1924 it became the Department of Economics, History, and Sociology; in 1931 it became the Department of Economics and Sociology. In 1967 it became the Department of Economics, and in 2007 it became co-directed by the Colleges of Agriculture and Life Sciences, Liberal Arts and Sciences, and Business.

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1898–present

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  • Department of Economic Science (1898–1910)
  • Department of Economics and Political Science (1910-1913)
  • Department of Applied Economics and Social Science (1913–1924)
  • Department of Economics, History and Sociology (1924–1931)
  • Department of Economics and Sociology (1931–1967)

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Economics
Abstract

Dumping and antidumping are among the prominent issues in trade negotiations these days. All economists agree that any barrier to the free flow of goods among countries of the world is welfare reducing. However, the proponents of antidumping laws claim that these laws are not meant to limit free trade but to promote fair trade, and therefore, if the trade is fair in laissez-faire environments, which in this case implies that dumping does not occur in the absence of antidumping law, the introduction of antidumping laws should not matter;The definition of dumping commonly used in antidumping cases is that dumping is considered to have occurred if the price charged by a firm in a foreign market inclusive of transportation costs is lower than the price that firm charges for the same product in a domestic market. In these circumstances the antidumping law recommends that tariff, which is some proportion of the difference in the two prices, be imposed on the imports. We use best response curves in a simple duopoly model and analyze the effects of antidumping laws. We show that this type of tariff rule gives an edge to the home (importing) firm over the foreign (exporting) firm and creates non-concavity in the home firm's profit function, and this causes jumps in its best response curve. While solving the model we show that multiple local solutions may exist due to the unique structure of the home firm's best response curve. When solutions are hard to characterize analytically, we use numeric simulation. We simulate a situation where, in the absence of antidumping law, dumping does not take place in equilibrium. However, if the antidumping law is introduced in this situation, multiple solutions emerge some of which are in the regions where the law is actually binding for the foreign firm;Intuitively, one expects that the antidumping laws would not affect decisions of the firms in both importing and exporting countries if the dumping does not occur in laissez-faire situation. However, we demonstrate that the presence of antidumping laws can lead firms to modify their behavior.

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Sat Jan 01 00:00:00 UTC 1994