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Optimal Tariffs When Production Is Fixed

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Author Info
Jose Mendez Naya (Universidade da Coruña)
Luciano Mendez Naya (Universidade de Santiago de Compostela)
Abstract

The effects of tariff wars on welfare are analysed for the case of trade between two countries with fixed outputs of the traded good. Assuming mild conditions, it is shown that if there are non-zero tariffs for which welfare-maximizing equilibrium holds, then free trade is not strictly preferable when the coutries' output are equal, and if there are not equal is strictly disadvantageous to the country with the smaller output. It is also shown that welfare-maximizing equilibria do exist if the demand function is linear.

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Publisher Info
Paper provided by IDEGA - Instituto Universitario de Estudios e Desenvolvemento de Galicia in its series Documentos de trabajo - Análise Económica with number 0005.

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Length: 28 pages
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Handle: RePEc:edg:anecon:0005

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Related research
Keywords: Commercial policy; Trade negotiations; Market Structure and Firms Strategy; Multinational Firms; Free Trade;

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This page was last updated on 2009-12-28.

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