Second-best trade policies in Cournot oligopoly

Luis Corchon and Miguel González-Maestre

Spanish Economic Review, 2001, vol. 3, issue 2, 81-96

Abstract: In this paper we study the optimal import policy in an oligopolistic market with a given number of quantity-setting firms. In the absence of fixed costs, we show that if the policy instrument is an import quota, the optimal policy is either free trade or autarky, while if the instrument is a tariff the optimal policy is neither free trade nor autarky. In the case of fixed costs, we show that contrary to the traditional protectionist argument, a restrictive import policy might increase domestic welfare by increasing domestic consumers' surplus, instead of increasing domestic profits.

Keywords: Import policy; oligopoly; quotas; tariffs (search for similar items in EconPapers)
JEL-codes: F12 F13 L13 (search for similar items in EconPapers)
Date: 2001-06-18
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Citations: View citations in EconPapers (1)

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