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Optimum Discriminatory Tariffs under Oligopolistic Competition

Author

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  • Hong Hwang
  • Chao-Cheng Mai

Abstract

This paper attempts to present a simple Cournot model to determine the optimal discriminatory tariff rates, when the international market is a homogeneous (heterogeneous) product market. In the model, there are two foreign firms located in two different countries competing for sales in a local market. When the firms sell a homogeneous product and the home country can impose differential tariffs on imports from different countries, then the tariff on the low-cost producer should be hgher. In particular, with constant marginal costs the tariff difference should equal half the cost difference. On the other hand, if the firms sell differentiated products with symmetric linear demands and technologies, then the weaker the degree of product differentiation, the greater is the tariff difference compared with the cost difference.

Suggested Citation

  • Hong Hwang & Chao-Cheng Mai, 1991. "Optimum Discriminatory Tariffs under Oligopolistic Competition," Canadian Journal of Economics, Canadian Economics Association, vol. 24(3), pages 693-702, August.
  • Handle: RePEc:cje:issued:v:24:y:1991:i:3:p:693-702
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    Citations

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    Cited by:

    1. Tsai Pan-Long, 1999. "Regional Intergration, Foreign Investment, And Optimal Trade And Investment Policies," International Economic Journal, Taylor & Francis Journals, vol. 13(1), pages 1-18.
    2. Pei-Cheng Liao, 2008. "International R&D Rivalry with Spillovers and Tariff Policies," Open Economies Review, Springer, vol. 19(1), pages 55-70, February.
    3. Jeongmeen Suh & Sihoon Nahm & Seung-Gyu Sim, 2016. "The Most Favored Nation Principle: Passive Constraint or Active Commitment?," Korean Economic Review, Korean Economic Association, vol. 32, pages 77-99.
    4. Saggi, Kamal, 2004. "Tariffs and the most favored nation clause," Journal of International Economics, Elsevier, vol. 63(2), pages 341-368, July.
    5. Horn, Henrik & Mavroidis, Petros C., 2001. "Economic and legal aspects of the Most-Favored-Nation clause," European Journal of Political Economy, Elsevier, vol. 17(2), pages 233-279, June.
    6. Choi, Jay Pil, 1995. "Optimal tariffs and the choice of technology Discriminatory tariffs vs. the 'Most Favored Nation' clause," Journal of International Economics, Elsevier, vol. 38(1-2), pages 143-160, February.
    7. Ya-Chin Wang, 2016. "R&D Policy Involving Consumer-Friendly Strategy: Cooperative and Non-Cooperative R&D," Journal of Industry, Competition and Trade, Springer, vol. 16(2), pages 257-272, June.
    8. Theodore To, 1999. "Dynamics and Discriminatory Import Policy," Canadian Journal of Economics, Canadian Economics Association, vol. 32(4), pages 1057-1068, August.
    9. Nigar Hashimzade & Hassan Khodavaisi & Gareth Myles, 2011. "MFN Status and the Choice of Tariff Regime," Open Economies Review, Springer, vol. 22(5), pages 847-874, November.
    10. Dobrin R. Kolev & Thomas J. Prusa, 1997. "Tariff Policy for a Monopolist Under Incomplete Information," NBER Working Papers 6090, National Bureau of Economic Research, Inc.
    11. Kolev, Dobrin R. & Prusa, Thomas J., 1999. "Tariff policy for a monopolist in a signaling game," Journal of International Economics, Elsevier, vol. 49(1), pages 51-76, October.
    12. Saggi, Kamal & Sengul, Faruk & Yildiz, Halis Murat, 2007. "Sustaining multilateral cooperation among asymmetric countries: Does MFN help?," International Review of Economics & Finance, Elsevier, vol. 16(4), pages 543-562.
    13. Beladi, Hamid & Chakrabarti, Avik, 2008. "Foreign equity participation under incomplete information," Journal of Economic Behavior & Organization, Elsevier, vol. 67(1), pages 279-295, July.
    14. repec:bla:reviec:v:25:y:2017:i:5:p:999-1016 is not listed on IDEAS
    15. Missios, Paul & Yildiz, Halis Murat, 2006. "The role of MFN under asymmetries in environmental standards," Economics Letters, Elsevier, vol. 93(2), pages 297-304, November.
    16. Hong-Ren Din & Kuang-Cheng Andy Wang & Wen-Jung Liang, 2016. "MFN vs Tariff Discrimination in the Presence of Cross Ownership," Review of International Economics, Wiley Blackwell, vol. 24(5), pages 1149-1166, November.
    17. Mehdi M. Chowdhury, "undated". "Migration, Remittances and Competition in International Labour Market," Discussion Papers 09/02, University of Nottingham, CREDIT.
    18. Saggi, Kamal & Yildiz, Halis Murat, 2005. "The Case for MFN under Asymmetries of Cost and Market Structure," MPRA Paper 76331, University Library of Munich, Germany.
    19. Kazuharu Kiyono & Jota Ishikawa, 2013. "Reexamination of Strategic Public Policies," The Japanese Economic Review, Japanese Economic Association, vol. 64(2), pages 201-231, June.

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