Second-best trade policies in Cournot oligopoly |
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Authors: | Luis C. Corchón Miguel González-Maestre |
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Affiliation: | (1) Departamento de Economía, Universidad Carlos III, c/Madrid 126, 28903 Getafe, Madrid, Spain , ES;(2) Universidad de Murcia, Facultad de Economía y Empresa, Departamento de Fundamentos del Análysis Económico, Campus de Espinardo, 301000 Murcia, Spain (e-mail: mmaestre@um.es) , ES |
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Abstract: | In this paper we study the optimal import policy in an oligopolistic market with a given number of quantity-setting firms. In the absence of fixed costs, we show that if the policy instrument is an import quota, the optimal policy is either free trade or autarky, while if the instrument is a tariff the optimal policy is neither free trade nor autarky. In the case of fixed costs, we show that contrary to the traditional protectionist argument, a restrictive import policy might increase domestic welfare by increasing domestic consumers' surplus, instead of increasing domestic profits. |
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Keywords: | JEL classification:L13 F12 F13 |
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