The (Non-)Equivalence of Tariffs and Quantity Restraints as 'Rent-Shifting' Policies

S. McCorriston and Ian Sheldon

Canadian Journal of Economics, 1997, vol. 30, issue 4, 1220-33

Abstract: In a differentiated oligopoly with quantity as the strategic variable, an optimal tariff can lead to a welfare gain. When a quantity restraint is used instead, this gain can be offset, since the quota induces anticompetitive effects. However, alternative quantity restraints, such as import quotas or voluntary export restraints, whether specified in volume or ratio form, will influence the strength of the anticompetitive effect. In this paper, the authors evaluate empirically the degree of nonequivalence between alternative trade instruments and the factors that likely influence it.

Date: 1997
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