Antidumping protection and R&D competition

In recent years antidumping protection has spread throughout the world. Evidence shows that antidumping often targets R&D‐intensive sectors, raising a concern that it may adversely affect worldwide investments in R&D. We investigate this issue in a model of reciprocal dumping extended to a two‐stage game, in which two firms first choose R&D levels and then compete in prices. We find that, when a single government institutes antidumping law, the protected firm decreases investment in R&D, while the constrained firm invests more. When both governments engage in antidumping actions, both firms invest more in R&D than under free trade. JEL classification: F12, F13