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A Comparison of Tariffs and Quotas in a Strategic Setting

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  • Karp, Larry S.

Abstract

We model the situation where two large countries impose either tariffs or quotas and a third large country remains passive. The introduction of the third country overturns results from two-country models. Stable quota equilibria are capable of reproducing the equilibrium price under tariffs, and Nash equilibria with quotas can result in positive amounts of trade. Using a linear partial equilibrium model, we show that world welfare may be higher under Nash quotas than under Nash tariffs. However, simulation results suggest that tariffs are likely to result in higher welfare than quotas.

Suggested Citation

  • Karp, Larry S., 1988. "A Comparison of Tariffs and Quotas in a Strategic Setting," Working Papers 51250, International Agricultural Trade Research Consortium.
  • Handle: RePEc:ags:iatrwp:51250
    DOI: 10.22004/ag.econ.51250
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    Citations

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    Cited by:

    1. Strand, Jon, 2013. "Strategic climate policy with offsets and incomplete abatement: Carbon taxes versus cap-and-trade," Journal of Environmental Economics and Management, Elsevier, vol. 66(2), pages 202-218.
    2. Larry Karp & Sauleh Siddiqui & Jon Strand, 2016. "Dynamic Climate Policy with Both Strategic and Non-strategic Agents: Taxes Versus Quantities," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 65(1), pages 135-158, September.
    3. Wirl, Franz, 2012. "Global warming: Prices versus quantities from a strategic point of view," Journal of Environmental Economics and Management, Elsevier, vol. 64(2), pages 217-229.

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    Keywords

    International Relations/Trade;

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