Tariffs in a Dynamic Differentiated Duopoly
The effects of an unilateral tariff on prices, quantities, and welfare in the presence of a dynamic elements facing imperfectly competitive firms is examined. International duopolists, selling differentiated products, interact strategically in price setting game under the tariff policy. It is shown that the presence of dynamic elements in the form of adjustment costs to changing sales volume significantly affect the relationship between tariff rates and aggregate domestic welfare even when sales are constant and no adjustment costs are actually paid. The level of optimal tariffs is associated with higher adjustment costs. Of particular interest is the possibility that autarky is optimal under positive adjustment costs while tariff restricted trade is optimal in the absence of such costs.
|Date of creation:||Jun 1991|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: (613) 533-2250
Fax: (613) 533-6668
Web page: http://qed.econ.queensu.ca/
More information through EDIRC
When requesting a correction, please mention this item's handle: RePEc:qed:wpaper:823. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Mark Babcock)
If references are entirely missing, you can add them using this form.