This paper shows that governments have no incentive to introduce nontariff barriers when they are free to set tariffs but they do when tariffs are determined cooperatively. We then show three results. First, with trade liberalization, there is a progression from using tariffs only to quotas, and...

This paper considers the relative efficiency of ad valorem and unit taxes in imperfectly competitive markets. We provide a simple proof that ad valorem taxes are welfare-superior to unit taxes in the short run when production costs are identical across firms. The proof covers differentiated...

We analyze the incidence of ad valorem and unit excise taxes in an oligopolistic industry with differentiated products and price-setting (Bertrand) firms. Both taxes may be passed on to consumers by more than 100 percent, and an increase in the tax rate can increase short run firm profits (and...