Optimal tariffs when production is fixed

José Méndez Naya and Luciano Méndez Naya
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José Méndez Naya: Universidade da Coruña
Luciano Méndez Naya: Universidade de Santiago de Compostela

No 5, Documentos de trabajo - Analise Economica from IDEGA - Instituto Universitario de Estudios e Desenvolvemento de Galicia

Abstract: The effects of tariff wars on welfare are analyzed for the case of trade between two countries with fixed outputs of the traded good. Assuming mild conditions, it is shown that if there are non-zero tariffs for which welfare-maximizing equilibrium holds, then free trade is not strictly preferable when the countries' output are equal, and if there are not equal is strictly disadvantageous to the country with the smaller output. It is also shown that welfare-maximizing equilibria do exist if the demand function is linear.

Keywords: Commercial policy; Trade negotiations; Market Structure and Firms Strategy; Multinational Firms, Free Trade (search for similar items in EconPapers)
JEL-codes: F13 F23 L1 (search for similar items in EconPapers)
Pages: 28 pages
Date: 1998
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Persistent link: https://EconPapers.repec.org/RePEc:edg:anecon:0005

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