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Comparison of price caps and tariffs to counter a foreign monopoly

Author

Listed:
  • Ehrhart, Karl-Martin
  • Schlecht, Ingmar
  • Schmitz, Jan
  • Wang, Runxi

Abstract

This paper compares import tariffs and import price caps as policy measures to regulate a foreign monopolist. We show that for any positive import tariff there exists a set of price caps each of which Pareto-dominates the tariff. This result is particularly important in the case of nontransferable utilities, as in the illustrated example of the EU-Russia gas market.

Suggested Citation

  • Ehrhart, Karl-Martin & Schlecht, Ingmar & Schmitz, Jan & Wang, Runxi, 2023. "Comparison of price caps and tariffs to counter a foreign monopoly," Economics Letters, Elsevier, vol. 227(C).
    • Handle: RePEc:eee:ecolet:v:227:y:2023:i:c:s0165176523001532
    DOI: 10.1016/j.econlet.2023.111128
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    Cited by:

    1. Francesco Ravazzolo & Luca Rossini, 2023. "Is the Price Cap for Gas Useful? Evidence from European Countries," Working Papers 2023.23, Fondazione Eni Enrico Mattei.

    More about this item

    Keywords

    Monopoly regulation; Price cap; Tariff; European Union; Russia; Energy policy;
    All these keywords.

    JEL classification:

    • D42 - Microeconomics - - Market Structure, Pricing, and Design - - - Monopoly
    • 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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