A general-equilibrium model of tariffs in a noncompetitive economy

Recent contributions to the theory of the effective-protection and domestic-resource-cost indicators of resource allocation have shown that general-equilibrium rather than partial-equilibrium models are required. Yet general-equilibrium models have, to date, assumed competitive behavior, an assumption which is at variance with reality and which is inconvenient empirically. This paper argues for the use of simple general-equilibrium models embodying noncompetitive pricing assumptions and then presents such a model. A test of the model on data from the Ivory Coast shows that different assumed pricing behaviors do lead to different resource allocations, suggesting that the assumption of competition in a noncompetitive world may give misleading results.