Dynamics and Discriminatory Import Policy

Ted To

International Trade from EconWPA

Abstract: Although the GATT prohibits discriminatory import tariffs, it includes means for circumventing this prohibition. The previous literature uses static models and discriminatory tariffs increase welfare. In a dynamic model, if governments lack the ability to precommit, this is not necessarily true. For example, with consumer switching costs, tariffs are higher for firms with higher market share. Rationally expecting such policies, firms price less aggressively. If switching costs are significant relative to asymmetries, then higher prices can result in lower importing country welfare. Thus it may be in interests of importers to abide by the GATT MFN principle.

Keywords: discriminatory tariffs; trade policy; switching costs; market share (search for similar items in EconPapers)
JEL-codes: F12 F13 L13 (search for similar items in EconPapers)
Date: 1996-02-10, Revised 1998-11-28
Note: forthcoming in Candian Journal of Economics; Type of Document - LaTeX; prepared on IBM PC; to print on any; pages: 14; figures: none
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Related works:
Working Paper: Dynamics and Discriminatory Import Policy (1998)
Journal Article: Dynamics and Discriminatory Import Policy (1999)
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Persistent link: http://EconPapers.repec.org/RePEc:wpa:wuwpit:9602001

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