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Tariffs, Quotas, and Market Structure

Motoshige Itoh and Yoshiyasu Ono

The Quarterly Journal of Economics, 1982, vol. 97, issue 2, 295-305

Abstract: This paper examines the effects of tariffs and quotas on the pricing pattern of producers in the case of duopoly by a domestic monopolist and a foreign monopolist. It is pointed out that tariffs and quotas may induce completely different pricing patterns in the two producers. Under a quota, it is always profitable for the home producer to be a price leader and for the foreign producer to be a follower, whereas under a tariff either producer may become a leader. It is also proved that, whatever leader-follower relation is chosen under a tariff, a quota always bring about a higher domestic price than the tariff as long as both permit the same amount of imports.

Date: 1982
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The Quarterly Journal of Economics is currently edited by Robert J. Barro, Lawrence F. Katz, Nathan Nunn, Andrei Shleifer and Stefanie Stantcheva

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