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Tariffs And Subsidies Under Asymmetric Oligopoly: Ad Valorem Versus Specific Instruments

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Author Info
DAVID R. COLLIE

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Abstract

This paper analyses the welfare effects of ad valorem and specific trade policy instruments (import tariffs and production subsidies) under asymmetric Cournot oligopoly and then compares the efficiency of ad valorem with specific instruments. It is shown that these trade policy instruments have rationalization effects similar to those in Collie (European Journal of Political Economy, Vol. 9 (1993), pp. 275-280), and that an ad valorem production subsidy will have an additional negative rationalization effect. Also, it is shown that an ad valorem production subsidy yields lower welfare than a specific production subsidy due to this additional negative rationalization effect, and that combining ad valorem and specific instruments yields welfare gains. Copyright © 2006 The Author; Journal compilation © Blackwell Publishing Ltd and The University of Manchester 2006.

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File URL: http://www.blackwell-synergy.com/doi/abs/10.1111/j.1467-9957.2006.00495.x
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Publisher Info
Article provided by University of Manchester in its journal Manchester School.

Volume (Year): 74 (2006)
Issue (Month): 3 (06)
Pages: 314-333
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Handle: RePEc:bla:manchs:v:74:y:2006:i:3:p:314-333

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  1. Ngo Van Long & Antoine Soubeyran, 2003. "A Theory of Favoritism under International Oligopoly," CIRANO Working Papers 2003s-15, CIRANO. [Downloadable!]
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