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Signalling and underutilization of import quota

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  • Karel Janda

Abstract

This study introduces an information asymmetry regarding the foreign exporter's cost in a strategic trade model. We show that it is possible to use import quotas or voluntary export restraints as a signal of the strength of the foreign exporter who enters into a previously protected domestic market. Our model provides a possible explanation for the underutilization of import quotas that is consistent with rational behaviour on the part of importing and exporting countries. Under the assumption that the exporter's marginal cost of securing the import quota is sufficiently low the underutilization of an import quota is an equilibrium result.

Suggested Citation

  • Karel Janda, 2001. "Signalling and underutilization of import quota," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 11(4), pages 351-365.
    • Handle: RePEc:taf:jitecd:v:11:y:2001:i:4:p:351-365
    DOI: 10.1080/0963819022000014285
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    1. Frohberg, Klaus & Hartmann, Monika, 1997. "Promoting CEA agricultural exports through association agreements with the EU: why it is not working," IAMO Discussion Papers 1, Leibniz Institute of Agricultural Development in Transition Economies (IAMO).
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    Cited by:

    1. Martin Janíčko & Ivo Koubek, 2012. "Informační asymetrie a systém dvojího standardu ve vztahu zdravotník - pacient [Information Assymetry and Double Standard in the Doctor-Patient Relationship]," Politická ekonomie, Prague University of Economics and Business, vol. 2012(3), pages 362-379.
    2. Jana Chvalkovská & Petr Janský & Jiří Skuhrovec, 2012. "Listinné akcie na majitele a veřejné zakázky [Bearer Shares in Paper Form and Public Procurement]," Politická ekonomie, Prague University of Economics and Business, vol. 2012(3), pages 349-361.

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