On the Welfare Equivalence of Tariffs and Quotas under Duopoly

Dominik Egli and Frank Westermann

Swiss Journal of Economics and Statistics (SJES), 2001, vol. 137, issue II, 171-182

Abstract: It is shown that the equivalence of tariffs and quotas is not valid if one defines equivalence in terms of welfare. In a duopoly where a home and a foreign firm compete on a domestic market, an optimal quota leads to a lower welfare than an optimal tariff. Still, any import quantity can be achieved either by a quota or an appropriately chosen tariff. Furthermore we show that moving from autarchy to free trade may reduce welfare.

Date: 2001
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