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The Impact of Quotas and Tariffs on Strategic R&D Behavior

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  • Reitzes, James D

Abstract

Quotas and tariffs are compared in a two-stage Cournot duopoly game where R&D is chosen initially and output is selected subsequently. Imposing a quota at or below the free-trade import level results in either a pure-strategy or a mixed-strategy equilibrium. Compared to an equally restrictive tariff, a quota leads to higher domestic profits, but lower domestic output and R&D (in a pure-strategy equilibrium). Furthermore, a quota and a tariff may often produce opposite effects on domestic R&D. A quota set above the free-trade import level may become binding and may lead to multiple equilibria. Copyright 1991 by Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association.

Suggested Citation

  • Reitzes, James D, 1991. "The Impact of Quotas and Tariffs on Strategic R&D Behavior," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 32(4), pages 985-1007, November.
    • Handle: RePEc:ier:iecrev:v:32:y:1991:i:4:p:985-1007
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    Cited by:

    1. Basak, Suleyman & Pavlova, Anna, 2002. "A Dynamic Model with Import Quota Constraints," CEPR Discussion Papers 3414, C.E.P.R. Discussion Papers.
    2. Dinlersoz, Emin & Dogan, Can, 2010. "Tariffs versus anti-dumping duties," International Review of Economics & Finance, Elsevier, vol. 19(3), pages 436-451, June.
    3. Hsiu-Li Chen, 2000. "On the Equivalence of Tariffs and Quotas with Endogenous Technology Choice," Journal of Economic Development, Chung-Ang Unviersity, Department of Economics, vol. 25(2), pages 55-67, December.
    4. Herguera, Inigo & Kujal, Praveen & Petrakis, Emmanuel, 2000. "Quantity restrictions and endogenous quality choice," International Journal of Industrial Organization, Elsevier, vol. 18(8), pages 1259-1277, December.
    5. Praveen Kujal & Juan Ruiz, 2003. "International Trade Policy towards Monopolies and Oligopolies," International Trade 0302002, University Library of Munich, Germany, revised 24 Mar 2003.
    6. Chen, Hung-Yi & Chang, Yang-Ming & Chiou, Jiunn-Rong, 2011. "A welfare analysis of tariffs and equivalent quotas under demand uncertainty: Implications for tariffication," International Review of Economics & Finance, Elsevier, vol. 20(4), pages 549-561, October.
    7. Fung, Michael Ka-Yiu, 1995. "Quotas, GNP and labor supply in a small open economy," International Review of Economics & Finance, Elsevier, vol. 4(1), pages 79-87.
    8. Li, Changying & Maskus, Keith E., 2006. "The impact of parallel imports on investments in cost-reducing research and development," Journal of International Economics, Elsevier, vol. 68(2), pages 443-455, March.
    9. Delia Baghdasaryan & Krešimir Žigić, 2010. "Tariffs, market conduct and government commitment," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 18(1), pages 91-122, January.
    10. Haruna Shoji & Goel Rajeev K., 2016. "International Tariffs in a Mixed Oligopoly with Research Spillovers," Peace Economics, Peace Science, and Public Policy, De Gruyter, vol. 22(3), pages 277-293, August.
    11. Delia Ionaºcu & Kresimir Zigic, 2005. "Strategic Tariff Protection, Market Conduct, and Government Commitment Levels in Developing Economies," CERGE-EI Working Papers wp249, The Center for Economic Research and Graduate Education - Economics Institute, Prague.
    12. Julien Berthoumieu & Viola Lamani, 2016. "Vertical Differentiation, Uncertainty, Product R&D and Policy Instruments in a North-South Duopoly," Working Papers hal-01285559, HAL.

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