Maximum-revenue tariffs versus free trade |
| |
Authors: | David R Collie |
| |
Institution: | Cardiff Business School, Cardiff University, Cardiff, UK |
| |
Abstract: | Welfare with the maximum-revenue tariff is compared to free-trade welfare under Cournot duopoly with differentiated products; under Bertrand duopoly with differentiated products; and under perfect competition in the case of a large country able to affect its terms of trade. Under Cournot duopoly and Bertrand duopoly, assuming linear demands and constant marginal costs, welfare with the maximum-revenue tariff is always higher than free-trade welfare. Under perfect competition, assuming linear demand and supply, welfare with the maximum-revenue tariff will be higher than free-trade welfare if the country has sufficient market power. |
| |
Keywords: | Bertrand oligopoly Cournot oligopoly free trade maximum-revenue tariff perfect competition |
|
|