Minimum Quality Levels And Import Tariffs
AbstractIn a vertically differentiated duopoly the use of import tariffs by an importing country decreases domestic welfare if import tariffs are chosen once the firms have made their quality decisions. In this paper we propose import tariffs that are contingent on some minimum quality level (MQL) being met. A firm is taxed if it fails to meet these MQL. Import tariffs conditional on fulfilling the MQL are welfare improving over free trade. Investment in quality increases, market coverage goes up and consumer surplus increases. Firm profits decrease relative to free trade under such tariffs.
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Bibliographic InfoPaper provided by Universidad Carlos III, Departamento de Economía in its series Economics Working Papers with number we034817.
Date of creation: Oct 2003
Date of revision:
This paper has been announced in the following NEP Reports:
- NEP-ALL-2003-11-09 (All new papers)
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