Injury Investigations in Anti-dumping and the Super-Additivity Effect: A Theoretical Explanation
(Unpublished) (with Poonam Gupta). The empirical literature on anti-dumping shows that ceteris paribus the probability of a positive finding in injury investigations is higher when defendants are many and small than when they are few and large. Stated precisely, holding the market share of defendant firms constant, “cumulation,” defined as the practice of aggregating over the exports of several countries, has a positive effect on the probability of an affirmative injury determination. In this paper, we offer a theoretical explanation of this finding. We show that the presence of many small exporters exacerbates the free-rider problem that accompanies multiple defendants. Unlike the dumping margin, which must be determined separately for each defendant firm, the injury determination is common to all defendant firms: either all defendants are found guilty of causing injury to the domestic firm or all are acquitted. To the extent that defense may be costly, this fact inevitably gives rise to a free-rider problem.