 Uniform versus discriminatory tariffs when competition mode is endogenousKi-Dong Lee and Kangsik Choi Bulletin of Economic Research, 2024, vol. 76, issue 1, 95-120 Abstract: We examine the welfare implications of two tariff regimes when firms have a forward‐looking view on trade policy. Discriminatory tariffs lead to Cournot competition, whereas uniform tariffs lead to diverse competition modes. If exporters are identical in production costs, all the trading countries are better off under the uniform rather than discriminatory tariff regime, which suggests a possibility that countries reach an agreement on the most‐favored nation (MFN) as a preferred tariff regime. For asymmetric costs among exporters; however, the competition mode determined endogenously under the uniform tariffs does matter for the welfare comparison. If Cournot competition emerges, then each country's preference is consistent with conventional wisdom. That is, the importing country and high‐cost exporters prefer a discriminatory tariff while low‐cost exporters have a uniform tariff regime. However, if the uniform regime leads to either Bertrand or asymmetric competition mode, then the cost gap between exporters would be the determinant factor. Only when the cost gap is sufficiently small, the uniform tariff, required by the MFN clause of the World Trade Organization, can be beneficial to all trading countries. Date: 2024 Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:bla:buecrs:v:76:y:2024:i:1:p:95-120 Ordering information: This journal article can be ordered from Access Statistics for this article More articles in Bulletin of Economic Research from Wiley Blackwell |
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