A Comparison of Tariffs and Quotas in a Strategic Setting

We model the situation where two large countries impose either tariffs or quotas and a third large country remains passive. The introduction of the third country overturns results from two-country models. Stable quota equilibria are capable of reproducing the equilibrium price under tariffs, and Nash equilibria with quotas can result in positive amounts of trade. Using a linear partial equilibrium model, we show that world welfare may be higher under Nash quotas than under Nash tariffs. However, simulation results suggest that tariffs are likely to result in higher welfare than quotas.


Issue Date:
1988
Publication Type:
Working or Discussion Paper
PURL Identifier:
http://purl.umn.edu/51250
Total Pages:
34
Series Statement:
Working Paper
88-6




 Record created 2017-04-01, last modified 2017-08-25

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