The standard solution of the open-loop optimal import tariff is normally time inconsistent. This paper shows why and derives the dynamically consistent Markov perfect tariff. The two tariffs are compared; they differ except for a special class of import demands. The time paths of tariffs and the welfare cost of an inability to commit are calculated for a dominant importer. The welfare costs of the inability to commit are small if its market share is below one-half.
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Volume (Year): 25 (1992) Issue (Month): 1 (February) Pages: 1-21 Download reference. The following formats are available: HTML
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Handle: RePEc:cje:issued:v:25:y:1992:i:1:p:1-21
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