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Quotas and the Stability of Implicit Collusion

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  • Julio J. Rotemberg
  • Garth Saloner

Abstract

This paper shows that the imposition of an import quota by one country can lead to increased competitiveness; protection can reduce the price in the country that imposes the quota, the foreign country, or both. This emerges from a model in which the firms are assumed to sustain collusion by the threat of reversion to more competitive pricing. We consider both prices and quantities as the strategic variables and study competition both in the domestic and the foreign market taken individually, and in the two markets taken together.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 1948.

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Date of creation: Jun 1986
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Publication status: published as "Tariffs Vs. Quotas with Implicit Collusion," Canadian Journal of Economics , Vol. 22, No. 2, pp. 237-244, May 1989.
Handle: RePEc:nbr:nberwo:1948

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  1. Dixit, Avinash K & Kyle, Albert S, 1985. "The Use of Protection and Subsidies for Entry Promotion and Deterrence," American Economic Review, American Economic Association, vol. 75(1), pages 139-52, March.
  2. James A. Brander & Barbara J. Spencer, 1980. "Tariffs and the Extraction of Foreign Monopoly Rents under Potential Entry," Working Papers 414, Queen's University, Department of Economics.
  3. Davidson, Carl, 1984. "Cartel stability and tariff policy," Journal of International Economics, Elsevier, vol. 17(3-4), pages 219-237, November.
  4. Friedman, James W, 1971. "A Non-cooperative Equilibrium for Supergames," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 38(113), pages 1-12, January.
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Cited by:
  1. Raymond J. Deneckere & Dan Kovenock, 1988. "Capacity-Constrained Price Competition When Unit Costs Differ," Discussion Papers, Northwestern University, Center for Mathematical Studies in Economics and Management Science 861, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  2. Steven Globerman, 1990. "Trade liberalization and competitive behavior: A note assessing the evidence and the public policy implications," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 9(1), pages 80-88.
  3. Paul Krugman, 1986. "Industrial Organization and International Trade," NBER Working Papers 1957, National Bureau of Economic Research, Inc.

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