The structure of optimal tariff rates in a large country with market power

We theoretically analyze the optimal tariff problem that arises in a large country with market power. By using a model with more than two traded goods, we derive (1) the condition for optimal import tariff rates to be ranked, and (2) the condition under which the optimum import tariff becomes uniform. These conditions are established in a three-good model and in an N-good model. The results are evaluated on the basis of compensated excess demand elasticity, and hence do not require information on income effects. I would like to thank Tatsuo Hatta, Makoto Okamura, Katsuhiko Suzuki and two anonymous referees for their helpful comments and suggestions.