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Maximum‐revenue tariffs versus free trade

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  • David R. Collie

Abstract

Welfare with the maximum‐revenue tariff is compared to free‐trade welfare under Cournot duopoly with differentiated products; under Bertrand duopoly with differentiated products; and under perfect competition in the case of a large country able to affect its terms of trade. Under Cournot duopoly and Bertrand duopoly, assuming linear demands and constant marginal costs, welfare with the maximum‐revenue tariff is always higher than free‐trade welfare. Under perfect competition, assuming linear demand and supply, welfare with the maximum‐revenue tariff will be higher than free‐trade welfare if the country has sufficient market power.

Suggested Citation

  • David R. Collie, 2020. "Maximum‐revenue tariffs versus free trade," Scottish Journal of Political Economy, Scottish Economic Society, vol. 67(4), pages 442-447, September.
  • Handle: RePEc:bla:scotjp:v:67:y:2020:i:4:p:442-447
    DOI: 10.1111/sjpe.12245
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    More about this item

    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
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations

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