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The Choice of Optimal Protection under Oligopoly: Import Tariff v. Production Subsidy

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  • Tsuyoshi Toshimitsu

Abstract

Economists researching the area of optimal protection have tended to analyse the ranking of alternative policy tools in the presence of perfect competition, either when the government in an importing country achieves a non‐economic target, or when there is a market distortion. Assuming international oligopolistic competition, I reconsider the choice of optimal policy instruments, i.e. an import tariff and a production subsidy. I show that the choice of optimal policy instruments depends on the relative number of home firms and foreign ones and on the magnitude of international cost differences. JEL Classification Numbers: F12, F13.

Suggested Citation

  • Tsuyoshi Toshimitsu, 2002. "The Choice of Optimal Protection under Oligopoly: Import Tariff v. Production Subsidy," The Japanese Economic Review, Japanese Economic Association, vol. 53(3), pages 301-314, September.
  • Handle: RePEc:bla:jecrev:v:53:y:2002:i:3:p:301-314
    DOI: 10.1111/1468-5876.00230
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    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations

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