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The structure of Nash equilibrium tariffs

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  • Yoshitomo Ogawa

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    Abstract

    This paper examines theoretically the structure of optimal (Nash equilibrium) tariff rates in a two-country economy with more than two traded goods. We provide a condition under which the equilibrium tariff rates are uniform in both countries, and explore the relative size of the equilibrium tariff rates in each country when the uniform tariff condition is not satisfied. The elasticities of compensated excess demand for goods play an important role in characterizing the structure of the equilibrium tariff rates. This paper undertakes the analysis using a dual approach. Copyright Springer-Verlag 2012

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    File URL: http://hdl.handle.net/10.1007/s00199-010-0599-x
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    Bibliographic Info

    Article provided by Springer in its journal Economic Theory.

    Volume (Year): 51 (2012)
    Issue (Month): 1 (September)
    Pages: 139-161

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    Handle: RePEc:spr:joecth:v:51:y:2012:i:1:p:139-161

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    Related research

    Keywords: Nash equilibrium tariff; Uniformity; Own-price elasticity; Cross-elasticity; F11; F13;

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    1. Ben Zissimos, 2009. "Optimum Tariffs and Retaliation: How Country Numbers Matter," Vanderbilt University Department of Economics Working Papers 0904, Vanderbilt University Department of Economics.
    2. Bhagwati, Jagdish N & Kemp, Murray C, 1969. "Ranking of Tariffs under Monopoly Power in Trade," The Quarterly Journal of Economics, MIT Press, vol. 83(2), pages 330-35, May.
    3. Young, Leslie, 1991. "Optimal Tariffs: A Generalization," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 32(2), pages 341-70, May.
    4. Tower, Edward, 1977. "Ranking the optimum tariff and the maximum revenue tariff," Journal of International Economics, Elsevier, vol. 7(1), pages 73-79, February.
    5. Carsten Kowalczyk & Raymond Riezman, 2009. "Free trade: what are the terms-of-trade effects?," Economic Theory, Springer, vol. 41(1), pages 147-161, October.
    6. Mukrat C. Kemp, 1967. "Notes on the Theory of Optimal Tariffs," The Economic Record, The Economic Society of Australia, vol. 43(3), pages 395-404, 09.
    7. Kar-yiu Wong & Ben Lockwood, 1997. "Specific and Ad Valorem Tariffs are not Equivalent in Trade Wars," Working Papers 0081, University of Washington, Department of Economics.
    8. Christian Broda & Nuno Limao & David E. Weinstein, 2008. "Optimal Tariffs and Market Power: The Evidence," American Economic Review, American Economic Association, vol. 98(5), pages 2032-65, December.
    9. Bond, Eric W, 1990. "The Optimal Tariff Structure in Higher Dimensions," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 31(1), pages 103-16, February.
    10. Otani, Yoshihiko, 1980. "Strategic Equilibrium of Tariffs and General Equilibrium," Econometrica, Econometric Society, vol. 48(3), pages 643-62, April.
    11. Kennan, John & Riezman, Raymond, 1988. "Do Big Countries Win Tariff Wars?," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 29(1), pages 81-85, February.
    12. Yoshitomo Ogawa, 2007. "The structure of optimal tariff rates in a large country with market power," Economic Theory, Springer, vol. 33(2), pages 271-283, November.
    13. Feenstra, Robert C., 1986. "Trade policy with several goods and market linkages," Journal of International Economics, Elsevier, vol. 20(3-4), pages 249-267, May.
    14. Syropoulos, Constantinos, 2003. "Rules for the disposition of tariff revenues and the determination of common external tariffs in customs unions," Journal of International Economics, Elsevier, vol. 60(2), pages 387-416, August.
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