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Competition and the Equivalence of Tariffs and Quotas

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  • Xiangqun Chen

Abstract

This paper considers the conditions under which tariffs and quotas are equivalent. I examine an oligopoly in which conjectural variations are consistent. I find that quotas eliminate competition from foreign firms, thus altering firms' conjectures, whereas tariffs do not. The results indicate that when the number of domestic firms is more than one, tariffs and quotas are equivalent only under constant marginal costs. When the number is one, they are generally not equivalent.

Suggested Citation

  • Xiangqun Chen, 1994. "Competition and the Equivalence of Tariffs and Quotas," The American Economist, Sage Publications, vol. 38(2), pages 36-39, October.
    • Handle: RePEc:sae:amerec:v:38:y:1994:i:2:p:36-39
    DOI: 10.1177/056943459403800204
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    References listed on IDEAS

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    1. Martin K. Perry, 1982. "Oligopoly and Consistent Conjectural Variations," Bell Journal of Economics, The RAND Corporation, vol. 13(1), pages 197-205, Spring.
    2. Itoh, Motoshige & Ono, Yoshiyasu, 1984. "Tariffs vs. quotas under duopoly of heterogeneous goods," Journal of International Economics, Elsevier, vol. 17(3-4), pages 359-373, November.
    3. Robert C. Feenstra, 1988. "Quality Change Under Trade Restraints in Japanese Autos," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 103(1), pages 131-146.
    4. Motoshige Itoh & Yoshiyasu Ono, 1982. "Tariffs, Quotas, and Market Structure," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 97(2), pages 295-305.
    5. Hwang, Hong & Mai, Chao-cheng, 1988. "On the equivalence of tariffs and quotas under duopoly : A conjectural variation approach," Journal of International Economics, Elsevier, vol. 24(3-4), pages 373-380, May.
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