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Tariffs, Quotas, and Market Structure

Tariffs, Quotas, and Market Structure Abstract This paper examines the effects of tariffs and quotas on the pricing pattern of producers in the case of duopoly by a domestic monopolist and a foreign monopolist. It is pointed out that tariffs and quotas may induce completely different pricing patterns in the two producers. Under a quota, it is always profitable for the home producer to be a price leader and for the foreign producer to be a follower, whereas under a tariff either producer may become a leader. It is also proved that, whatever leader-follower relation is chosen under a tariff, a quota always bring about a higher domestic price than the tariff as long as both permit the same amount of imports. * We are indebted to an anonymous referee for many valuable comments. This content is only available as a PDF. © 1982 by the President and Fellows of Harvard College http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png The Quarterly Journal of Economics Oxford University Press

Tariffs, Quotas, and Market Structure

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References (4)

Publisher
Oxford University Press
Copyright
© 1982 by the President and Fellows of Harvard College
ISSN
0033-5533
eISSN
1531-4650
DOI
10.2307/1880759
Publisher site
See Article on Publisher Site

Abstract

Abstract This paper examines the effects of tariffs and quotas on the pricing pattern of producers in the case of duopoly by a domestic monopolist and a foreign monopolist. It is pointed out that tariffs and quotas may induce completely different pricing patterns in the two producers. Under a quota, it is always profitable for the home producer to be a price leader and for the foreign producer to be a follower, whereas under a tariff either producer may become a leader. It is also proved that, whatever leader-follower relation is chosen under a tariff, a quota always bring about a higher domestic price than the tariff as long as both permit the same amount of imports. * We are indebted to an anonymous referee for many valuable comments. This content is only available as a PDF. © 1982 by the President and Fellows of Harvard College

Journal

The Quarterly Journal of EconomicsOxford University Press

Published: May 1, 1982

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