Quota-Induced Cycles.
We present a new framework to compare the dynamic effect of tariffs, and quotas in the presence of oligopoly. Suppose that the domestic and the foreign firm play a quantity-setting game over time in a perfectly stationary economy. A Markov-perfect equilibrium has the foreign firm exporting at the constant rate under a tariff. In contrast, under the quota the rate of exports changes monotonically over the course of each year, causing seasonal fluctuations in domestic production. Quota-induced cycles can make dynamic market segmentation possible and raise profits for both the firms above what they earn under the equal-import tariff.
Year of publication: |
2001
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Authors: | Miyagiwa, Kaz ; Ohno, Yuka |
Published in: |
International Economic Review. - Department of Economics. - Vol. 42.2001, 2, p. 451-72
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Publisher: |
Department of Economics |
Saved in:
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