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Optimal Trade Policy When A Foreign Monopolist Has Unknown Costs: An Incentive-Compatible Approach

Author

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  • Aditya Bhattacharjea

    (Delhi School of Economics)

Abstract

This paper adapts an incentive-compatible regulatory mechanism to the problem of taxing a foreign monopolist with unknown costs, when price and quantity contracts cannot be enforced. It is shown that the optimal mechanism involves an import licence fee, and yields zero expected revenue to the government. These results are of some significance for the implementation of the mechanism.

Suggested Citation

  • Aditya Bhattacharjea, 1998. "Optimal Trade Policy When A Foreign Monopolist Has Unknown Costs: An Incentive-Compatible Approach," Indian Economic Review, Department of Economics, Delhi School of Economics, vol. 33(1), pages 97-104, January.
    • Handle: RePEc:dse:indecr:v:33:y:1998:i:1:p:97-104
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    Cited by:

    1. Ismail Saglam, 2024. "The Bayesian approach to monopoly regulation after 40 years," Journal of Regulatory Economics, Springer, vol. 65(1), pages 108-136, June.

    More about this item

    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • L5 - Industrial Organization - - Regulation and Industrial Policy

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