Dynamics and Discriminatory Import Policy
AbstractAlthough the GATT prohibits discriminatory import tariffs, it includes means for circumventing this prohibition. The previous literature uses static models and discriminatory tariffs increase welfare. In a dynamic model, if governments lack the ability to precommit, this is not necessarily true. For example, with consumer switching costs, tariffs are higher for firms with higher market share. Rationally expecting such policies, firms price less aggressively. If switching costs are significant relative to asymmetries, then higher prices can result in lower importing country welfare. Thus it may be in interests of importers to abide by the GATT MFN principle
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Bibliographic InfoArticle provided by Canadian Economics Association in its journal Canadian Journal of Economics.
Volume (Year): 32 (1999)
Issue (Month): 4 (August)
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Other versions of this item:
- Ted To, 1996. "Dynamics and Discriminatory Import Policy," International Trade 9602001, EconWPA, revised 28 Nov 1998.
- To, Ted, 1998. "Dynamics and Discriminatory Import Policy," CSGR Working papers series 07/98, Centre for the Study of Globalisation and Regionalisation (CSGR), University of Warwick.
- F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
- F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
- L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
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