Market Structure and Trade Policy under Asymmetric Information

Mohammad Amin ()

International Trade from EconWPA

Abstract: The paper compares tariffs and import quotas when the home firm has private information about its true cost and the government offers incentive contracts to extract this information. We highlight the role of underlying market structure in determining the ranking of the two policy instruments. Our results show that quotas are at least as efficient as tariffs in implementing the optimal level of protection and strictly more for a wide range of market structures. The exact condition for this is identified. Welfare-based ranking of the two instruments follows from this.

Keywords: Tariffs versus Quotas; Asymmetric Information; Conjectural Variations (search for similar items in EconPapers)
JEL-codes: F13 (search for similar items in EconPapers)
Date: Written 2004-02-05
Note: Type of Document - pdf; prepared on Win98; pages: 31
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