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Movements Toward Free Trade and Domestic Market Performance with Imperfect Competition

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Abstract

This paper studies the response of a dominant domestic oligopoly to the reduction in the rate of a protective tariff. The issue here is whether the domestic market performance is improved through a movement toward free trade alone. Put another way, is free trade always a substitute for competition policy? We find that the lower tariff may lead to inferior domestic market performance. The direction of the change and its magnitude are functions of the shape of the import supply function, the degree of competition between oligopolists and whether or not entry is possible. Thus, there is reason to believe that a strong competition policy may, in some markets, be complemnentary to freer trade.

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  • Tom Ross, 1986. "Movements Toward Free Trade and Domestic Market Performance with Imperfect Competition," Carleton Industrial Organization Research Unit (CIORU) 86-08, Carleton University, Department of Economics.
    • Handle: RePEc:car:ciorup:86-08
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    Cited by:

    1. Steven Globerman, 1990. "Trade liberalization and competitive behavior: A note assessing the evidence and the public policy implications," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 9(1), pages 80-88.

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