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Optimal tariffs when production is fixed

Author

Listed:
  • José Méndez Naya

    (Universidade da Coruña)

  • Luciano Méndez Naya

    (Universidade de Santiago de Compostela)

Abstract

The effects of tariff wars on welfare are analyzed for the case of trade between two countries with fixed outputs of the traded good. Assuming mild conditions, it is shown that if there are non-zero tariffs for which welfare-maximizing equilibrium holds, then free trade is not strictly preferable when the countries' output are equal, and if there are not equal is strictly disadvantageous to the country with the smaller output. It is also shown that welfare-maximizing equilibria do exist if the demand function is linear.

Suggested Citation

  • José Méndez Naya & Luciano Méndez Naya, 1998. "Optimal tariffs when production is fixed," Documentos de trabajo - Analise Economica 0005, IDEGA - Instituto Universitario de Estudios e Desenvolvemento de Galicia.
  • Handle: RePEc:edg:anecon:0005
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    More about this item

    Keywords

    Commercial policy; Trade negotiations; Market Structure and Firms Strategy; Multinational Firms; Free Trade;

    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business

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