International Price Discrimination and Dumping_v2

8/4/2019 International Price Discrimination and Dumping_v2

http://slidepdf.com/reader/full/international-price-discrimination-and-dumpingv2 1/22

International Price Discrimination and Dumping

Click to edit Master subtitle style 4/19/12

International Price Discriminationand Dumping

11

Niraj Sharma | Ayush Vij




4/19/12

Agenda• International Price Discrimination

•

Dumping• Price Discrimination and Social Welfare

• Price Discrimination and Equity

• Conclusion

22




4/19/12

International Price Discrimination• Price discrimination across borders

•

When a producer sells in two markets▫ One where he faces perfect competition, and

▫ Another where he enjoys monopoly

33




4/19/12

Key Features• Demand curve is perfectly elastic in the market where he faces perfect competition

• Demand curve is sloping downward in themarket where he has monopoly

44




4/19/12

Representing it Graphically

55

MRh

AR h

ARw=MRw

B

X

Y MC

C

O R M

PHP W

E DF.K 1




4/19/12

Example 1: PharmaceuticalCompanies• Huge price difference

for same medicines

• Ex. USA & Canada

66




4/19/12

Example 2: Textbooks• Textbooks cheaper in developing countries vs where they published

• Example: Low Price Edition Textbooks in India

77




4/19/12

Dumping

In economics, "dumping" can refer to any kind of predatory pricing (selling at an unfairly low price).

Pr edator yPr

Domestic Firm selling atlower price in home market

88




4/19/12

Definition of Dumping• In Context of International Trade Law:

“The act of a manufacturer/firm in one country exporting a product

to another country at a price which is either below the price it chargesin its home market or is below its costs of production."

• Therefore, it is the act of charging a lower price for a good in a

foreign market than one charges for the same good in a domesticmarket.Dum

pin

Foreign firm selling at lower price in other country.

99




4/19/12

Dumping

When,

Export Price

1. Comparable domesticPrice

2. Export Price to a ThirdCountry

3. Cost of Production Plus aReasonable Addition for Selling Cost and Profit

Normal Value

1010




4/19/12

Dumping Margin

minus

Normal Value of thelike article

Export price of

product under consideration

Domestic priceRs. 150

Export priceRs. 100

Dumping Margin = 150-100 = Rs.50.

Dumping Margin = 33%

1111

i l i i i i i d i




4/19/12

Domestic Industry

The domestic industry is all domestic producersof the product concerned, or those whose collective

output constitutes a major proportion of totaldomestic production of those products.

1212

I i l P i Di i i i d D i




4/19/12

Reasons for Dumping• Predatory Dumping

The practice of cutting prices in an attempt todrive a rival out of business or create barriers toentry for potential new competitors.

• Persistent/Strategic Dumping

If a firm has a monopoly in its home market butfaces strong competition in a foreign market, it will

charge a higher price in the home market

1313

I i l P i Di i i i d D i




4/19/12

Reasons for Dumping• Cyclical/Sporadic Dumping

Selling at low price because of over capacity dueto downturn in demand.

•

Market Expansion DumpingSelling at lower price for export than

domestically in order to gain market share.

•

1414

I t ti l P i Di i i ti d D i




4/19/12

Reasons for Dumping: Summary• The nations dump products to

Eliminate Competition

Secure Monopolies

Increase Share of International Export

1515

I t ti l P i Di i i ti d D i 6 6




4/19/12

Dumping: Factors• Subsidies

Subsidies (in the exporting country) can lead toaggressive dumping, since goods can be soldprofitably at a price that is cheaper than the cost of manufacture.

• Banned Products

History also sheds light on the numerous

manufacturers that have used dumping to sell off

1616

International Price Discrimination and D mping




4/19/12

Implications of Dumping• Dumping results in the following:

▫ Hurts a country’s domestic industry and producers

▫ Impacts the sales volume

▫ Hurts the market shares▫ Triggers decline in profitability

▫ Leads to job losses

▫ Cause material injury

1717

International Price Discrimination and Dumping 8 8




4/19/12

Antidumping• Due to the above narrated and other reasons,

countries have incorporated strict anti-dumping

measures.• The very purpose of antidumping measures is to

prop up domestic producers.

Advantages of anti-dumping

• Re-establishes fair trade and fair competition.

1818

International Price Discrimination and Dumping 1919




4/19/12

Price Discrimination & SocialWelfare• Difficult to say.

•

Partly depends upon whether with the pricedistribution , total output increases or not.

• Keeping output effect away price discrimination will adversely affect the social welfare.

• Under monopoly without price discrimination theoutput is less than the output with pricediscrimination.

1919





4/19/12

Price Discrimination and Equity• Price is raised for rich and lowered for the poor.

•

It has a redistributive effect.• Often done by governments to reduce inequalities

of personal real income.

2020





4/19/12

EXAMPLES

2121





4/19/12

Conclusion & Comments

2222

Date post:	07-Apr-2018
Category:	Documents
Upload:	mannysh
View:	219 times
Download:	0 times

International Price Discrimination and Dumping_v2

Documents