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Market Structure and Trade Policy under Asymmetric Information

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  • Mohammad Amin

Abstract

The paper compares tariffs and import quotas when the home firm has private information about its true cost and the government offers incentive contracts to extract this information. We highlight the role of underlying market structure in determining the ranking of the two policy instruments. Our results show that quotas are at least as efficient as tariffs in implementing the optimal level of protection and strictly more for a wide range of market structures. The exact condition for this is identified. Welfare-based ranking of the two instruments follows from this.

Suggested Citation

  • Mohammad Amin, 2004. "Market Structure and Trade Policy under Asymmetric Information," International Trade 0402004, University Library of Munich, Germany.
    • Handle: RePEc:wpa:wuwpit:0402004
    Note: Type of Document - pdf; prepared on Win98; pages: 31
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    File URL: https://econwpa.ub.uni-muenchen.de/econ-wp/it/papers/0402/0402004.pdf
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    References listed on IDEAS

    as
    1. Grossman, Gene M & Helpman, Elhanan, 1994. "Protection for Sale," American Economic Review, American Economic Association, vol. 84(4), pages 833-850, September.
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Tariffs versus Quotas; Asymmetric Information; Conjectural Variations;
    All these keywords.

    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations

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