The Nonequivalence of Tariffs and Quotas in a Dynamic Trade Model.
The paper provides a novel (and old) argument for the nonequivalence of tariffs and quotas, based on the famous paper by Hotelling published in 1931. Unlike tariffs, quantitative restrictions are inherently dynamic. As long as the foreign exporter earns positive marginal profits, he raises their present value by frontloading sales. As a result, unlike a tariff, equilibrium with a quota exhibits quantity and price dispersion over time. The dispersion may be significant even with small discount rates. Copyright 1999 by Blackwell Publishing Ltd.
Year of publication: |
1999
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Authors: | Konieczny, Jerzy D ; Waschik, Robert G |
Published in: |
Review of International Economics. - Wiley Blackwell, ISSN 0965-7576. - Vol. 7.1999, 4, p. 590-96
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Publisher: |
Wiley Blackwell |
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