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Quotas and the Stability of Implicit Collusion

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Julio J. Rotemberg
Garth Saloner

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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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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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Handle: RePEc:nbr:nberwo:1948

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  1. Raymond J. Deneckere & Dan Kovenock, 1988. "Capacity-Constrained Price Competition When Unit Costs Differ," Discussion Papers 861, Northwestern University, Center for Mathematical Studies in Economics and Management Science. [Downloadable!]
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  2. Paul Krugman, 1986. "Industrial Organization and International Trade," NBER Working Papers 1957, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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This page was last updated on 2009-12-16.

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