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Quotas Under Dynamic Bertrand Competition

In: International Trade and Economic Dynamics

Author

Listed:
  • Miyagiwa Kaz

    (Emory University)

  • Ohno Yuka

    (Deloitte Tax LLP)

Abstract

We present a new model of dynamic Bertrand competition, where a quota is treated as an intertemporal constraint, rather than as a capacity constraint. The firm under a quota then can still vary the rates of exports over time, provided that its annual sales do not exceed the quota. We show that a quota results in higher prices than a tariff of equal imports. We also find that firms never play mixed strategies in equilibrium, which contrasts from the result of a one-shot game, in which the only equilibrium under a quota is in mixed strategies (Krishna 1989).

Suggested Citation

  • Miyagiwa Kaz & Ohno Yuka, 2009. "Quotas Under Dynamic Bertrand Competition," Springer Books, in: Takashi Kamihigashi & Laixun Zhao (ed.), International Trade and Economic Dynamics, pages 239-255, Springer.
    • Handle: RePEc:spr:sprchp:978-3-540-78676-4_19
    DOI: 10.1007/978-3-540-78676-4_19
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