Optimal Trade Policy When A Foreign Monopolist Has Unknown Costs: An Incentive-Compatible Approach

Aditya Bhattacharjea

Indian Economic Review, 1998, vol. 33, issue 1, 97-104

Abstract: This paper adapts an incentive-compatible regulatory mechanism to the problem of taxing a foreign monopolist with unknown costs, when price and quantity contracts cannot be enforced. It is shown that the optimal mechanism involves an import licence fee, and yields zero expected revenue to the government. These results are of some significance for the implementation of the mechanism.

JEL-codes: F13 H21 L5 (search for similar items in EconPapers)
Date: 1998
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