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Quotas and the Stability of Implicit Collusion

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Listed author(s):
  • Julio J. Rotemberg
  • Garth Saloner

Abstract

This paper shows that the imposition of an import quota by one country can lead to increased competitiveness; protection can reduce the price in the country that imposes the quota, the foreign country, or both. This emerges from a model in which the firms are assumed to sustain collusion by the threat of reversion to more competitive pricing. We consider both prices and quantities as the strategic variables and study competition both in the domestic and the foreign market taken individually, and in the two markets taken together.

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File URL: http://www.nber.org/papers/w1948.pdf
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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 1948.

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Date of creation: Jun 1986
Publication status: published as "Tariffs Vs. Quotas with Implicit Collusion," Canadian Journal of Economics , Vol. 22, No. 2, pp. 237-244, May 1989.
Handle: RePEc:nbr:nberwo:1948
Note: ITI IFM
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  1. James W. Friedman, 1971. "A Non-cooperative Equilibrium for Supergames," Review of Economic Studies, Oxford University Press, vol. 38(1), pages 1-12.
  2. James A. Brander & Barbara J. Spencer, 1981. "Tariffs and the Extraction of Foreign Monopoly Rents under Potential Entry," Canadian Journal of Economics, Canadian Economics Association, vol. 14(3), pages 371-389, August.
  3. William A. Brock & José A. Scheinkman, 1985. "Price Setting Supergames with Capacity Constraints," Review of Economic Studies, Oxford University Press, vol. 52(3), pages 371-382.
  4. Davidson, Carl, 1984. "Cartel stability and tariff policy," Journal of International Economics, Elsevier, vol. 17(3-4), pages 219-237, November.
  5. Dixit, Avinash K & Kyle, Albert S, 1985. "The Use of Protection and Subsidies for Entry Promotion and Deterrence," American Economic Review, American Economic Association, vol. 75(1), pages 139-152, March.
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Cited by:

  1. Raymond J. Deneckere & Dan Kovenock, 1988. "Capacity-Constrained Price Competition When Unit Costs Differ," Discussion Papers 861, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  2. Steven Globerman, 1990. "Trade liberalization and competitive behavior: A note assessing the evidence and the public policy implications," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 9(1), pages 80-88.
  3. Krugman, Paul R., 1989. "Industrial organization and international trade," Handbook of Industrial Organization,in: R. Schmalensee & R. Willig (ed.), Handbook of Industrial Organization, edition 1, volume 2, chapter 20, pages 1179-1223 Elsevier.
  4. Gupta, B., 1995. "Collusion in the Indian Tea Industry in the Great Depression : An Analysis of Panel Data," Discussion Paper 1995-74, Tilburg University, Center for Economic Research.
  5. J. David Richardson & Robert S. Strauss & Michihiko Kunihiro & Edmund T. Pratt, Jr, 1988. "Trade Policy," NBER Chapters,in: International Economic Cooperation, pages 167-232 National Bureau of Economic Research, Inc.
  6. Gupta, Bishnupriya, 1997. "Collusion in the Indian Tea Industry in the Great Depression: An Analysis of Panel Data," Explorations in Economic History, Elsevier, vol. 34(2), pages 155-173, April.

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