Domestic entry, optimum-welfare and maximum-revenue tariffs
AbstractIn this paper, we examine the ranking of the maximum-revenue tariff and the optimum-welfare tariff under a linear Cournot oligopoly model without and with free entry of domestic firms. We demonstrate that in a regulated entry oligopoly with asymmetric costs, when the marginal cost of the domestic firms exceeds a critical value, the maximum-revenue tariff is higher than the optimum-welfare tariff. We then show that under free entry of domestic firms with asymmetric costs, when the fixed cost gets larger and the domestic firms become fewer, the difference between the optimum-welfare tariff and the maximum-revenue tariff becomes larger.
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Bibliographic InfoArticle provided by Elsevier in its journal Research in Economics.
Volume (Year): 66 (2012)
Issue (Month): 1 ()
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Web page: http://www.elsevier.com/locate/inca/622941
Cournot competition; Free entry; Tariff ranking;
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