A Comparison of Tariffs and Quotas in a Strategic Setting

Larry Karp

No 51250, Working Papers from International Agricultural Trade Research Consortium

Abstract: We model the situation where two large countries impose either tariffs or quotas and a third large country remains passive. The introduction of the third country overturns results from two-country models. Stable quota equilibria are capable of reproducing the equilibrium price under tariffs, and Nash equilibria with quotas can result in positive amounts of trade. Using a linear partial equilibrium model, we show that world welfare may be higher under Nash quotas than under Nash tariffs. However, simulation results suggest that tariffs are likely to result in higher welfare than quotas.

Keywords: International; Relations/Trade (search for similar items in EconPapers)
Pages: 34
Date: 1988
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:ags:iatrwp:51250

DOI: 10.22004/ag.econ.51250

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