Production Effects of Price- and Cost-Based Anti-Dumping Laws Under Flexible Exchange Rates

Abstract

This paper investigates the production response of an exporting firm when faced with the threat of an antidumping action. The firm's production decision is sensitive to market conditions at home and abroad, as well as to the definition of dumping. The authors examine the incentives facing the exporting firm under price-based, marginal-cost-based, and average-total-cost-based antidumping laws. Depending on the nature of the antidumping rules and market conditions, a firm's production may rise, fall, or remain unchanged in reponse to antidumping legislation.