Tariffs, Quotas and Forward Contracts Under Asymmetric Information
AbstractWe consider optimal trade policy for a large country with private information. We show that the optimal tariff leads to a signaling equilibrium with higher tariffs and lower welfare than under complete information, whereas the optimal import quota replicates the complete information equilibrium and thus is superior to the tariff. We also show that, with the tariff, the country may be better off being uninformed. Finally, we show that if the importing nation cannot commit to its tariff, the use of futures contracts together with the dynamically consistent tariff leads to the same equilibrium as under complete information with commitment. JEL Classification numbers: F13, D82
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Bibliographic InfoPaper provided by Iowa State University, Department of Economics in its series Staff General Research Papers with number 10288.
Date of creation: 01 May 2005
Date of revision:
Publication status: Published in Review of International Economics, May 2005, vol. 13 no. 2, pp. 311-29
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Postal: Iowa State University, Dept. of Economics, 260 Heady Hall, Ames, IA 50011-1070
Phone: +1 515.294.6741
Fax: +1 515.294.0221
Web page: http://www.econ.iastate.edu
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Other versions of this item:
- Tigran Melkonyan & Harvey Lapan, 2005. "Tariffs, Quotas, and Forward Contracts under Asymmetric Information," Review of International Economics, Wiley Blackwell, vol. 13(2), pages 311-329, 05.
- F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
- D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
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- Keisuke Hattori & Keisaku Higashida, 2011. "When Government Misleads US: Sending Misinformation as Protectionist Devices," Discussion Paper Series 75, School of Economics, Kwansei Gakuin University, revised Aug 2011.
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