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Tariffs with Dynamic Supply Response

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  • Karp, Larry

Abstract

This paper studies the optimal tariff in a dynamic framework. The effects of the supplier's rationality and of the type of strategy available to the importer are discussed. With rational sellers, the optimal tariff is dynamically inconsistent; the consistent tariff is extremely myopic and may be worse than free trade for the importer. The paper concentrates on the case in which the traded good is a reproducible commodity. This is compared to the situation in which the traded good is a nonrenewable resource. The plausibility of the consistent equilibrium, in the absence of binding commitments, is discussed.

Suggested Citation

  • Karp, Larry, 1985. "Tariffs with Dynamic Supply Response," Department of Agricultural & Resource Economics, UC Berkeley, Working Paper Series qt745770h7, Department of Agricultural & Resource Economics, UC Berkeley.
    • Handle: RePEc:cdl:agrebk:qt745770h7
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