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Strict quotas or tariffs? Implications for product quality and consumer welfare in differentiated product supply chains

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  • Nagurney, Anna
  • Besik, Deniz
  • Li, Dong

Abstract

We introduce a supply chain network equilibrium model with differentiated products, in which firms compete on product quantities and quality. We then extend the model to include a strict quota or tariff. We establish the equivalence between the model with a strict quota and that with a tariff, when the quota constraint is tight, and the tariff corresponds to the equilibrium Lagrange multiplier associated with the constraint for the former model. Numerical examples reveal that although firms may benefit from the imposition of a quota or tariff, the welfare of consumers in the country imposing the instrument declines.

Suggested Citation

  • Nagurney, Anna & Besik, Deniz & Li, Dong, 2019. "Strict quotas or tariffs? Implications for product quality and consumer welfare in differentiated product supply chains," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 129(C), pages 136-161.
    • Handle: RePEc:eee:transe:v:129:y:2019:i:c:p:136-161
    DOI: 10.1016/j.tre.2019.07.008
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    4. Feng, Pingping & Zhou, Xiaoyang & Zhang, Ding & Chen, Zhaobo & Wang, Shouyang, 2022. "The impact of trade policy on global supply chain network equilibrium: A new perspective of product-market chain competition," Omega, Elsevier, vol. 109(C).
    5. Yang, Huixiao & Ou, Jinwen & Chen, Xiaofeng, 2021. "Impact of tariffs and production cost on a multinational firm's incentive for backshoring under competition," Omega, Elsevier, vol. 105(C).
    6. Hu, Xiaowei & Li, Peng, 2022. "Relief and stimulus in a cross-sector multi-product scarce resource supply chain network," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 168(C).
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