What is Dumping?

Dumping is a discrimination of markets using different prices. There are various types of dumping, but we will investigate the most problematic one: persistent dumping. If a firm has a protected domesitc market, it will behave as a monopolist in the market, and a competitor in the world market. When it sells one more unit, it will compare MR from the domestic market and the world market, and choose the higher. We show the domestic MR as MR [1] and the world market MR as MRW that is the same as the world price PW. [2] Now MR > MRW up to the point G. [3] Therefore, it will sell Q4 units in the domestic market [4] with a price of P'd. [5] After that point, it will sell the good in the world market up to the point F where MRW=MC. [6] Thus it exports Q2 - Q4. [7]

Domestic consumer surplus: Autarky APdB [1] Free trade APWE [2] Dumping AP'dH [3] Domestic producer surplus: Autarky CPdBI [4] Free trade CPWF [5] Dumping CP'dHK+KGF [6]

Compared to free trade, by dumping, the domestic net loss is HGE