Tariff De-Escalation with Successive Oligopoly

Steve McCorriston and Ian Sheldon

No 201443, Working Papers from University of Wisconsin-Madison, Department of Agricultural and Applied Economics, Food System Research Group

Abstract: In this paper, we explore the issue of a simultaneous reduction in tariffs at different stages of a vertically-related market where each stage is oligopolistic. When vertically-related markets are characterized as a successive oligopoly, reducing tariffs by an equivalent amount on upstream and downstream imports will have a differential effect on market access and hence profits at each stage due to a combination of horizontal and vertical effects. As a consequence, in order to maintain parity between the upstream and downstream stages in terms of changes in domestic firms’ profits, tariffs on downstream imports should be reduced proportionately more than tariffs on upstream imports. This provides a rationale for tariff-reduction formulae aimed at reducing tariff escalation.

Keywords: Crop Production/Industries; Demand and Price Analysis (search for similar items in EconPapers)
Pages: 30
Date: 2009-01
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Citations: View citations in EconPapers (1)

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Related works:
Journal Article: Tariff (De‐) Escalation with Successive Oligopoly (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:ags:uwfswp:201443

DOI: 10.22004/ag.econ.201443

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