Tariffs with Dynamic Supply Response

Larry Karp

Department of Agricultural & Resource Economics, UC Berkeley, Working Paper Series from Department of Agricultural & Resource Economics, UC Berkeley

Abstract: This paper studies the optimal tariff in a dynamic framework. The effects of the supplier's rationality and of the type of strategy available to the importer are discussed. With rational sellers, the optimal tariff is dynamically inconsistent; the consistent tariff is extremely myopic and may be worse than free trade for the importer. The paper concentrates on the case in which the traded good is a reproducible commodity. This is compared to the situation in which the traded good is a nonrenewable resource. The plausibility of the consistent equilibrium, in the absence of binding commitments, is discussed.

Keywords: economics; equilibrium; supply elasticity; tariff (search for similar items in EconPapers)
Date: 1985-01-01
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Working Paper: Tariffs with dynamic supply response (1985)
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