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On the Welfare Equivalence of Tariffs and Quotas under Duopoly

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  • Dominik Egli
  • Frank Westermann

Abstract

It is shown that the equivalence of tariffs and quotas is not valid if one defines equivalence in terms of welfare. In a duopoly where a home and a foreign firm compete on a domestic market, an optimal quota leads to a lower welfare than an optimal tariff. Still, any import quantity can be achieved either by a quota or an appropriately chosen tariff. Furthermore we show that moving from autarchy to free trade may reduce welfare.

Suggested Citation

  • Dominik Egli & Frank Westermann, 2001. "On the Welfare Equivalence of Tariffs and Quotas under Duopoly," Swiss Journal of Economics and Statistics (SJES), Swiss Society of Economics and Statistics (SSES), vol. 137(II), pages 171-182, June.
    • Handle: RePEc:ses:arsjes:2001-ii-3
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    References listed on IDEAS

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