Please use this identifier to cite or link to this item:
https://hdl.handle.net/2440/108457
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Type: | Journal article |
Title: | Uniform versus discriminatory tariffs |
Author: | Hashimzade, N. Khodavaisi, H. Myles, G. |
Citation: | Review of Development Economics, 2011; 15(3):403-416 |
Publisher: | Blackwell Publishing |
Issue Date: | 2011 |
ISSN: | 1363-6669 1467-9361 |
Statement of Responsibility: | Nigar Hashimzade, Hassan Khodavaisi, and Gareth D. Myles |
Abstract: | We analyze the non-cooperative interaction between two exporting countries producing differentiated products and one importing country when governments use optimal policies to maximize welfare. The analysis includes product differentiation, asymmetric costs, and Bertrand competition. For identical exporting countries we demonstrate that the importing country always prefers a uniform tariff regime while both exporting countries prefer a discriminatory tariff regime for any degree of product differentiation. If countries are asymmetric in terms of production cost then the higher-cost exporter always prefers the discriminatory regime but the lower-cost exporter prefers the uniform regime if there is a significant cost differential. With cost asymmetry the announcement of a uniform tariff regime by the importer is not a credible strategy since there is an incentive to deviate to discrimination. This implies an international body can play a role in ensuring that tariff agreements are respected. |
Rights: | © 2011 Blackwell Publishing |
DOI: | 10.1111/j.1467-9361.2011.00616.x |
Published version: | http://dx.doi.org/10.1111/j.1467-9361.2011.00616.x |
Appears in Collections: | Aurora harvest 3 Economics publications |
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