Strict quotas or tariffs? Implications for product quality and consumer welfare in differentiated product supply chains

Anna Nagurney, Deniz Besik and Dong Li

Transportation Research Part E: Logistics and Transportation Review, 2019, vol. 129, issue C, 136-161

Abstract: We introduce a supply chain network equilibrium model with differentiated products, in which firms compete on product quantities and quality. We then extend the model to include a strict quota or tariff. We establish the equivalence between the model with a strict quota and that with a tariff, when the quota constraint is tight, and the tariff corresponds to the equilibrium Lagrange multiplier associated with the constraint for the former model. Numerical examples reveal that although firms may benefit from the imposition of a quota or tariff, the welfare of consumers in the country imposing the instrument declines.

Keywords: Supply chains; Networks; Trade policies; Agricultural products; Trade war; Game theory (search for similar items in EconPapers)
Date: 2019
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Citations: View citations in EconPapers (7)

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DOI: 10.1016/j.tre.2019.07.008

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