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Ranking the optimum tariff and the maximum revenue tariff in vertically related markets

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  • Wang, Leonard F.S.
  • Lee, Jen-yao

Abstract

This paper firstly shows that in a vertically related industry with either domestic upstream monopolist or foreign upstream monopolist, when the upstream firm adopts uniform input pricing, the optimum-welfare tariff is higher than the maximum-revenue tariff, if the number of foreign competitors is sufficiently large. Secondly, when domestic upstream monopolist adopts discriminatory input pricing, the maximum-revenue tariff is higher than the optimum-welfare tariff. Thirdly, when foreign upstream monopolist adopts discriminatory input pricing, the optimum-welfare tariff will exceed the maximum-revenue tariff if the sizes of domestic and foreign firms become more unequally distributed.

Suggested Citation

  • Wang, Leonard F.S. & Lee, Jen-yao, 2014. "Ranking the optimum tariff and the maximum revenue tariff in vertically related markets," Research in Economics, Elsevier, vol. 68(3), pages 222-229.
    • Handle: RePEc:eee:reecon:v:68:y:2014:i:3:p:222-229
    DOI: 10.1016/j.rie.2014.03.001
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