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Tariffs versus Quotas with Strategic Investment

Author

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  • Hideki Konishi

Abstract

The relative efficiency of tariffs versus quotas is analyzed in a Cournot oligopoly with strategic investment, introducing quota licence fees to neutralize the international distributional effect. When such licence fees remove quota rents from foreign firms, then, for the case of constrained entry with a sufficiently large number of firms, quotas frequently hold a welfare advantage, since tariffs relatively aggravate the inefficiency from overinvestment. In the case of free entry and exit, however, tariffs hold a welfare advantage, since there is greater benefit of increasing returns to scale to the economy by avoidance of excessive entry of firms.

Suggested Citation

  • Hideki Konishi, 1999. "Tariffs versus Quotas with Strategic Investment," Canadian Journal of Economics, Canadian Economics Association, vol. 32(1), pages 71-91, February.
  • Handle: RePEc:cje:issued:v:32:y:1999:i:1:p:71-91
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    Citations

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    Cited by:

    1. Jan Jørgensen & Philipp Schröder, 2007. "Effects of Tariffication: Tariffs and Quotas under Monopolistic Competition," Open Economies Review, Springer, vol. 18(4), pages 479-498, September.
    2. Chen, Hung-Yi & Chang, Yang-Ming & Chiou, Jiunn-Rong, 2011. "A welfare analysis of tariffs and equivalent quotas under demand uncertainty: Implications for tariffication," International Review of Economics & Finance, Elsevier, vol. 20(4), pages 549-561, October.
    3. Matsumura, Toshihiro & Okamura, Makoto, 2006. "Equilibrium number of firms and economic welfare in a spatial price discrimination model," Economics Letters, Elsevier, vol. 90(3), pages 396-401, March.

    More about this item

    JEL classification:

    • F1 - International Economics - - Trade
    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance

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