Domestic entry, optimum-welfare and maximum-revenue tariffs

Leonard F.S. Wang and Jen-Yao Lee

Research in Economics, 2012, vol. 66, issue 1, 106-109

Abstract: In this paper, we examine the ranking of the maximum-revenue tariff and the optimum-welfare tariff under a linear Cournot oligopoly model without and with free entry of domestic firms. We demonstrate that in a regulated entry oligopoly with asymmetric costs, when the marginal cost of the domestic firms exceeds a critical value, the maximum-revenue tariff is higher than the optimum-welfare tariff. We then show that under free entry of domestic firms with asymmetric costs, when the fixed cost gets larger and the domestic firms become fewer, the difference between the optimum-welfare tariff and the maximum-revenue tariff becomes larger.

Keywords: Cournot competition; Free entry; Tariff ranking (search for similar items in EconPapers)
Date: 2012
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Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:reecon:v:66:y:2012:i:1:p:106-109

DOI: 10.1016/j.rie.2011.07.001

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