Trade, the damage from alien species, and the effects of protectionism under alternate market structures
We first construct three measures of the expected damage from the unintentional introduction of alien species into a country called Home. We then focus on four market structures. First, perfect competition prevails in both Home and Foreign, and Home is a small country. Second, the Home and the Foreign markets are both perfectly competitive, but Home is now a large country. Third, the exporter in Foreign is a monopolist and there are no import competing firms in Home. Finally, the Foreign exporter and the import competing firm in Home engage in Cournot competition. In all four scenarios, we analyze the impact of small and optimal Home tariffs on prices, exports, imports, the damage from alien species, and social welfare in Home. Inter alia, our analysis identifies conditions under which it makes sense to use trade policy (tariffs) to regulate invasive species and conditions under which it does not.
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