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Second-best trade policies in Cournot oligopoly

Author

Listed:
  • Luis C. Corchón

    () (Departamento de Economía, Universidad Carlos III, c/Madrid 126, 28903 Getafe, Madrid, Spain Universidad de Murcia, Facultad de Economía y Empresa, Departamento de Fundamentos del Análysis Económico, Campus de Espinardo, 301000 Murcia, Spain)

  • Miguel González-Maestre

    () (Departamento de Economía, Universidad Carlos III, c/Madrid 126, 28903 Getafe, Madrid, Spain Universidad de Murcia, Facultad de Economía y Empresa, Departamento de Fundamentos del Análysis Económico, Campus de Espinardo, 301000 Murcia, Spain)

Abstract

In this paper we study the optimal import policy in an oligopolistic market with a given number of quantity-setting firms. In the absence of fixed costs, we show that if the policy instrument is an import quota, the optimal policy is either free trade or autarky, while if the instrument is a tariff the optimal policy is neither free trade nor autarky. In the case of fixed costs, we show that contrary to the traditional protectionist argument, a restrictive import policy might increase domestic welfare by increasing domestic consumers' surplus, instead of increasing domestic profits.

Suggested Citation

  • Luis C. Corchón & Miguel González-Maestre, 2001. "Second-best trade policies in Cournot oligopoly," Spanish Economic Review, Springer;Spanish Economic Association, vol. 3(2), pages 81-96.
  • Handle: RePEc:spr:specre:v:3:y:2001:i:2:p:81-96
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    Cited by:

    1. Furusawa, Taiji & Higashida, Keisaku & Ishikawa, Jota, 2003. "What information is needed for welfare-enhancing policies under international oligopoly?," Japan and the World Economy, Elsevier, vol. 15(1), pages 31-46, January.

    More about this item

    Keywords

    Import policy; oligopoly; quotas; tariffs;

    JEL classification:

    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • 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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