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Two-Part Trade Policy under Imperfect Competition

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  • Fuerst, Timothy S
  • Kim, Kyoo H

Abstract

In this paper we consider the potential gain of a government pursuing a two-part trade policy: an import license for entry, along with a per-unit tariff on imports. The model is a two-stage game of complete but imperfect information. In the first stage, the domestic government sets trade policy, while in the second stage the home and foreign producers behave as Cournot competitors. The paper demonstrates that the optimal trade policy depends upon the number of firms, the degree of heterogeneity in cost functions, and the degree of convexity in cost functions. Copyright 1997 by Blackwell Publishing Ltd.

Suggested Citation

  • Fuerst, Timothy S & Kim, Kyoo H, 1997. "Two-Part Trade Policy under Imperfect Competition," Review of International Economics, Wiley Blackwell, vol. 5(1), pages 63-71, February.
    • Handle: RePEc:bla:reviec:v:5:y:1997:i:1:p:63-71
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    Cited by:

    1. Sonali Deraniyagala & Ben Fine, 2000. "New Trade Theory Versus Old Trade Policy: A Continuing Enigma," Working Papers 102, Department of Economics, SOAS University of London, UK.

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