Abstract

The phenomenon of dumping has been noticed for several years. However, past literature focused on the rationale of dumping, the interaction of upstream and downstream industries is neglected. Bemhofen （1995） is the first paper that discussed dumping in the upstream industry. We extend the model in Bemhofen（1995） into that product differentiation of the final goods is taken into account. And therefore, we find several interesting results. First, product differentiation plays no role in the occurrence of dumping. Second, when antidumping duty is imposed for maximizing social welfare, the more substitution the final goods is, the lower antidumping duty government I will impose. Third, if antidumping duty is imposed for reducing price difference, there is a positive relationship between product substitution and the tariff rate.

When technology gap of the downstream firms is taken into account, the condition of dumping will be different. We will have three conclusions. First, even there is no cost difference of the downstream firms, dumping could also happen. Second, if antidumping duty is imposed for maximizing social welfare, the lower technology D1 engages, the lower the tariff rate is. Furthermore, the lower technology D2 processes, the higher the tariff rate is. Third, if antidumping duty is imposed for reducing price difference, the lower technology Z)i engages, the higher the tariff rate. Furthermore, the lower technology D2 processes, the lower the tariff rate.