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Performance Contingent Protection

Author

Listed:
  • William H. Kaempfer
  • Edward Tower
  • Thomas D. Willett

Abstract

In this paper we ask how to construct a tariff or quota schedule which depends on the behavior of a domestic monopsonistic monopolist in order to achieve the best tradeoff between two objectives of a government. We consider various political and economic tradeoffs which could face the policy maker: aggregate welfare versus industry profits, output and imports; and trade barrier revenue versus industry profits and domestic price. In all cases considered, performance contingent protection which takes the form either of a tariff which depends on domestic output or a quota which depends on the price charged is generally superior to a fixed tariff or quota and is sufficient to achieve optimality.

Suggested Citation

  • William H. Kaempfer & Edward Tower & Thomas D. Willett, 1989. "Performance Contingent Protection," Economics and Politics, Wiley Blackwell, vol. 1(3), pages 261-275, November.
    • Handle: RePEc:bla:ecopol:v:1:y:1989:i:3:p:261-275
    DOI: 10.1111/j.1468-0343.1989.tb00017.x
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    References listed on IDEAS

    as
    1. James E. Anderson, 1988. "The Relative Inefficiency of Quotas," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262511789, April.
    2. Jagdish N. Bhagwati, 1982. "Import Competition and Response," NBER Books, National Bureau of Economic Research, Inc, number bhag82-1.
    3. Jagdish N. Bhagwati, 1982. "Introduction to "Import Competition and Response"," NBER Chapters, in: Import Competition and Response, pages 1-8, National Bureau of Economic Research, Inc.
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