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Optimum‐Welfare And Maximum‐Revenue Tariffs In Mixed Oligopoly With Foreign Competitors

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  • LEONARD F.S. WANG
  • JEAN WANG
  • JEN‐YAO LEE

Abstract

This paper re‐examines the important tariff ranking issue under a linear mixed oligopoly model with foreign competitors and asymmetric costs. We demonstrate that under Cournot competition, when the size of domestic private and foreign private firms become more unequally distributed, optimum‐welfare tariff will exceed maximum‐revenue tariff. We also show that under Stackelberg competition, when the domestic government protects its domestic sector, it will levy higher optimum‐welfare tariffs versus maximum‐revenue tariffs; however, when it decides to open its doors more for foreign competitors, it will need to levy higher maximum‐revenue tariffs versus optimum‐welfare tariffs. The above results remain valid whether the domestic public firm acts as a leader or a follower.

Suggested Citation

  • Leonard F.S. Wang & Jean Wang & Jen‐Yao Lee, 2010. "Optimum‐Welfare And Maximum‐Revenue Tariffs In Mixed Oligopoly With Foreign Competitors," Australian Economic Papers, Wiley Blackwell, vol. 49(1), pages 60-72, March.
    • Handle: RePEc:bla:ausecp:v:49:y:2010:i:1:p:60-72
    DOI: 10.1111/j.1467-8454.2010.00387.x
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    References listed on IDEAS

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    2. Shih‐Jye Wu & Yang‐Ming Chang & Hung‐Yi Chen, 2016. "Imported inputs and privatization in downstream mixed oligopoly with foreign ownership," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 49(3), pages 1179-1207, August.
    3. Xu, Lili & Lee, Sang-Ho & Wang, Leonard, 2017. "Strategic Trade and Privatization Policies in Bilateral Mixed Markets," MPRA Paper 80340, University Library of Munich, Germany.
    4. Shih‐Shen Chen & Po‐Sheng Ko & Jen‐Yao Lee & Chien‐Shu Tsai, 2024. "Trade, industrial, and privatization policies with endogenous market structure," Manchester School, University of Manchester, vol. 92(5), pages 494-506, September.
    5. Wang, Leonard F.S. & Lee, Jen-Yao, 2012. "Domestic entry, optimum-welfare and maximum-revenue tariffs," Research in Economics, Elsevier, vol. 66(1), pages 106-109.
    6. Toshihiro Matsumura & Akira Ogawa, 2017. "Endogenous Timing in Mixed Duopolies With Externality," Australian Economic Papers, Wiley Blackwell, vol. 56(4), pages 304-327, December.
    7. John S. Heywood & Lu Xu & Guangliang Ye, 2019. "How does a public innovator license a foreign rival?," Australian Economic Papers, Wiley Blackwell, vol. 58(1), pages 78-95, March.
    8. Leonard Wang & Jen-yao Lee & Chin-shu Huang, 2012. "Maximum-Revenue and Optimum-Welfare Tariffs in International Mixed Duopoly: Does the Order of Firms’ Move Matter?," Journal of Industry, Competition and Trade, Springer, vol. 12(3), pages 273-283, September.
    9. Wang, Leonard F.S. & Lee, Jen-yao & Hsu, Chu-chuan, 2014. "Privatization, foreign competition, and social efficiency of free entry," International Review of Economics & Finance, Elsevier, vol. 31(C), pages 138-147.
    10. Lyu, Yuanzhen & Shuai, Jie, 2017. "Mixed duopoly with foreign firm and subcontracting," International Review of Economics & Finance, Elsevier, vol. 49(C), pages 58-68.
    11. Wang, Leonard F.S. & Lee, Jen-yao, 2014. "Ranking the optimum tariff and the maximum revenue tariff in vertically related markets," Research in Economics, Elsevier, vol. 68(3), pages 222-229.

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