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Pro-Competitive Tariffs

Author

Listed:
  • Ivette Jans
  • Howard J. Wall

Abstract

When foreign and domestic firms collude under free trade, a tariff can be pro-competitive because it drives a wedge between the interests of the firms. However, only if the firms meet in a small number of countries can a tariff be used to prevent international collusion. In the case in which a tariff can preclude collusion, the optimal tariff is high enough to do so, and is higher than in otherwise-equivalent static models of imperfect competition without collusion. In contrast with conventional models, the pro-competitive effect of a domestic tariff may mean that the tariff that is optimal for the dometic country is also the worldwide optimum.

Suggested Citation

  • Ivette Jans & Howard J. Wall, 1996. "Pro-Competitive Tariffs," Archive Discussion Papers 9607, Birkbeck, Department of Economics, Mathematics & Statistics.
  • Handle: RePEc:bbk:bbkewp:9607
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    More about this item

    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade

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