On the Equivalence of Ad Valorem Tariffs and Specific Tariffs under Duopoly*

Koon Lam Shea and Esther Y. P. Shea

Review of International Economics, 2006, vol. 14, issue 3, 445-451

Abstract: Using a quantity conjectural variation model, this paper examines whether an ad valorem tariff and a specific tariff are equivalent under duopoly. We show that if the average per‐unit import tax is the same for the two tariffs, domestic output will be smaller while foreign output will be larger under an ad valorem tariff. We further show that for any value of a specific tariff, there is a Pareto‐superior ad valorem tariff for all values of conjectural variation except in the case of perfect competition where the two tariffs are equivalent.

Date: 2006
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