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Tariff Policy and Entry with Cost-Based Informational Asymmetries

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  • Herander, Mark G
  • Kamp, Brad

Abstract

This study introduces a cost-based informational asymmetry into a two-period signaling model. The authors examine the effects of import tariff policy within this environment of incomplete information and compare them to the standard, full information effects. When tariff rates can be credibly fixed, the standard effects of tariff policy may be significantly altered. For example, lower tariffs may discourage foreign entry because of the induced signaling effects of tariff policy. Moreover, because the impact of tariff policy depends on the cost structure of domestic firms, uninformed policymakers will not be able to predict the qualitative effects of tariff policy. Copyright 1999 by Oxford University Press.

Suggested Citation

  • Herander, Mark G & Kamp, Brad, 1999. "Tariff Policy and Entry with Cost-Based Informational Asymmetries," Economic Inquiry, Western Economic Association International, vol. 37(1), pages 60-73, January.
    • Handle: RePEc:oup:ecinqu:v:37:y:1999:i:1:p:60-73
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    Cited by:

    1. Mohd Amin, 2004. "Sensitivity of Tariffs and Quotas: A Signaling Game," International Trade 0401003, University Library of Munich, Germany.
    2. Sun, Ning & Yao, Hongxin, 2011. "Manipulable behavior in international trade," Economic Modelling, Elsevier, vol. 28(1-2), pages 60-66, January.
    3. Aditya Bhattacharjea, 2002. "Infant Industry Protection Revisited," International Economic Journal, Taylor & Francis Journals, vol. 16(3), pages 115-133.
    4. Sun, Ning & Yao, Hongxin, 2011. "Manipulable behavior in international trade," Economic Modelling, Elsevier, vol. 28(1), pages 60-66.

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