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The Nonequivalence of Tariffs and Quotas in a Dynamic Trade Model

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  • Konieczny, Jerzy D
  • Waschik, Robert G

Abstract

The paper provides a novel (and old) argument for the nonequivalence of tariffs and quotas, based on the famous paper by Hotelling published in 1931. Unlike tariffs, quantitative restrictions are inherently dynamic. As long as the foreign exporter earns positive marginal profits, he raises their present value by frontloading sales. As a result, unlike a tariff, equilibrium with a quota exhibits quantity and price dispersion over time. The dispersion may be significant even with small discount rates. Copyright 1999 by Blackwell Publishing Ltd.

Suggested Citation

  • Konieczny, Jerzy D & Waschik, Robert G, 1999. "The Nonequivalence of Tariffs and Quotas in a Dynamic Trade Model," Review of International Economics, Wiley Blackwell, vol. 7(4), pages 590-596, November.
    • Handle: RePEc:bla:reviec:v:7:y:1999:i:4:p:590-96
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    Cited by:

    1. Manitra Rakotoarisoa, 2011. "Strategic Trade Policies Under Monopsony and Uncertainty: The Exporter’s Non-Linear Responses Based on the Organization of Its Industry," Journal of Industry, Competition and Trade, Springer, vol. 11(2), pages 187-201, June.

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