Quotas Under Dynamic Bertrand Competition

Miyagiwa Kaz () and Yuka Ohno
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Miyagiwa Kaz: Emory University

A chapter in International Trade and Economic Dynamics, 2009, pp 239-255 from Springer

Abstract: We present a new model of dynamic Bertrand competition, where a quota is treated as an intertemporal constraint, rather than as a capacity constraint. The firm under a quota then can still vary the rates of exports over time, provided that its annual sales do not exceed the quota. We show that a quota results in higher prices than a tariff of equal imports. We also find that firms never play mixed strategies in equilibrium, which contrasts from the result of a one-shot game, in which the only equilibrium under a quota is in mixed strategies (Krishna 1989).

Keywords: Nash Equilibrium; Free Trade; Mixed Strategy; Capacity Constraint; Pure Strategy (search for similar items in EconPapers)
Date: 2009
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Persistent link: https://EconPapers.repec.org/RePEc:spr:sprchp:978-3-540-78676-4_19

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DOI: 10.1007/978-3-540-78676-4_19

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