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Movements towards Free Trade and Domestic Market Performance with Imperfect Competition

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  • Thomas W. Ross

Abstract

This paper studies the response of a dominant domestic oligopoly to the reduction in the rat e of a protective tariff. The issue here is whether domestic market p erformance is improved through a movement toward free trade alone. Pu t another way, is free trade always a substitute for competition poli cy? The author finds that the lower tariff may lead to inferior domes tic market performance. The direction of the change and its magnitude are functions of the shape of the import supply function, the degree of competition between oligopolists, and whether or not entry is pos sible. Thus, there is reason to believe that a strong competition pol icy may, in some markets, be complementary to freer trade.

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Bibliographic Info

Article provided by Canadian Economics Association in its journal Canadian Journal of Economics.

Volume (Year): 21 (1988)
Issue (Month): 3 (August)
Pages: 507-24

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Handle: RePEc:cje:issued:v:21:y:1988:i:3:p:507-24

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Cited by:
  1. Mercenier, J. & Schmitt, N., 1992. "Sunk Costs, Free-Entry Equilibrium and Trade Liberalization in Applied General Equilibrium : Implication for "Europe 1992"," Cahiers de recherche 9235, Centre interuniversitaire de recherche en économie quantitative, CIREQ.
  2. Steven Globerman, 1990. "Trade liberalization and competitive behavior: A note assessing the evidence and the public policy implications," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 9(1), pages 80-88.
  3. Head, Keith & Ries, John, 1999. "Rationalization effects of tariff reductions," Journal of International Economics, Elsevier, vol. 47(2), pages 295-320, April.
  4. Hazledine, Tim, 1989. "Industrial Organisation Foundations Of Trade Policy Modelling," Australian Journal of Agricultural Economics, Australian Agricultural and Resource Economics Society, vol. 33(01), April.

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