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Trade Warfare: Tariffs and Cartels

  • James A. Brander
  • Barbara J. Spencer

National governments have incentives to intervene in international markets, particularly in encouraging export cartels and in imposing tariffs on imports from imperfectly competitive foreign firms. Although the optimal response to foreign monopoly is usually a tariff, a specific subsidy will be optimal if demand is very convex, as with constant elasticity demand. If ad valorem tariffs or subsidies are considered, a subsidy is optimal if the elasticity of demand increases as consumption increases.The critical conditions in both ad valorern and specific cases hold generally for Cournot ologopoly. Noncooperative international policy equilibrium will be characterized by export cartels and rent-extracting tariffs.

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File URL: http://www.nber.org/papers/w1193.pdf
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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 1193.

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Date of creation: Aug 1983
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Publication status: published as Brander, James A. and Barbara J. Spencer. "Trade Warfare: Tariffs and Cartels." Journal of International Economics, Vol. 16, No. 3, (May 1984), pp. 227-242.
Handle: RePEc:nbr:nberwo:1193
Note: ITI IFM
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  1. Svedberg, Peter, 1979. "Optimal Tariff Policy on Imports from Multinationals," The Economic Record, The Economic Society of Australia, vol. 55(148), pages 64-67, March.
  2. Bergstrom, Theodore C, 1982. "On Capturing Oil Rents with a National Excise Tax," American Economic Review, American Economic Association, vol. 72(1), pages 194-201, March.
  3. Just, Richard E & Schmitz, Andrew & Zilberman, David, 1979. "Price Controls and Optimal Export Policies under Alternative Market Structures," American Economic Review, American Economic Association, vol. 69(4), pages 706-14, September.
  4. Frenkel, Jacob A, 1971. "On Domestic Demand and Ability to Export," Journal of Political Economy, University of Chicago Press, vol. 79(3), pages 668-72, May-June.
  5. de Meza, David, 1979. "Commercial Policy Towards Multinational Monopolies-Reservations on Katrak," Oxford Economic Papers, Oxford University Press, vol. 31(2), pages 334-37, July.
  6. Auquier, A A & Caves, R E, 1979. "Monopolistic Export Industries, Trade Taxes, and Optimal Competition Policy," Economic Journal, Royal Economic Society, vol. 89(355), pages 559-81, September.
  7. Basevi, Giorgio, 1970. "Domestic Demand and Ability to Export," Journal of Political Economy, University of Chicago Press, vol. 78(2), pages 330-37, March-Apr.
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