DOMINANT STRATEGIC TRADE POLICY
DOI:
https://doi.org/10.17770/etr2021vol2.6542Keywords:
strategic trade policy, Nash equilibrium, tariffs, quotas, subsidiesAbstract
In implementing trade policy measures, governments usually select from a range of instruments including quotas, subsidies (explicit or implicit) and tariffs. In this paper we consider the potential gain of a government pursuing a two-part trade policy: an import license for entry, along with a per-unit tariff on imports. The model is a three-step game between home and foreign countries in the Cournot duopoly. The paper demonstrates that two-part trade policy is dominant.References
J. N. Bhagwati, “On the Equivalence of Teriffs and Quotas”, In Robert E. Baldwin et al. (ets), Trade, Growth and the Balance of Payments: Essays in Honor of Gottfried Haberler. Chicago: Rand McNally, 1965.
J. E. Anderson, The Relative Inefficiency of Quotas. The MIT Press, 1988.
K. Krishna, “Trade Restrictions as Facilitating Practices,” Journal of International Economics, vol. 26, pp. 251-270, 1989.
J. A. Brander and B. J. Spencer, “Export subsidies and market share rivalry,” Journal of International Economics, vol. 18, pp. 83-100, 1985.
J. H. Cassing and A.L. Hillman, “Political Influence Motives and the Choice between Tariffs and Quotas,” Journal of International Economics, vol. 19, pp. 279-290, 1985.
W. Y. Oi, “A Disneyland Dilemma: Two-Part Tariffs for a Mickey Mouse Monopoly,” Quarterly Journal of Economics, vol. 85, pp. 77-90, 1971.
L. Philips, The Economics of Price Discrimination. Cambridge University Press , 1983.
R. B. Wilson, Nonlinear Pricing. Oxford University Press, 1993.
T. S. Fuerst and K. H. Kim, “Two - Part Trade Policy under Imperfect Competition,” Review of International Economics vol. 5(1), pp. 63-71, 1997.
