Proportional Import Restraints in Oligopoly

Denicolò, Vincenzo ; Garella, Paolo (1995) Proportional Import Restraints in Oligopoly. Bologna: Dipartimento di Scienze economiche DSE, p. 20. DOI 10.6092/unibo/amsacta/5074. In: Quaderni - Working Paper DSE (239).
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Abstract

We study the differences in the impact of trade restrictions on the level of imports (e.g. 200,000 automobiles per years) and restrictions defined in terms of market shares (e.g. 10% of the market). We argue that if domestic firms enjoy some market power proportional trade restrictions have a stronger anticompetitive effect than volume restrictions, and therefore lead to higher equilibrium prices and lower social welfeare. In the case of Cournot competition and constant marginal costs, with proportional import restraints the equilibrium price sticks to the autarchic level, independently of the market share reserved for foreign firms. As a consequence, enlarging the share of imports does not increase consumers surplus and negatively affects the profits of domestic firms, thus lowering social welfare.

Abstract
Document type
Monograph (Working Paper)
Creators
CreatorsAffiliationORCID
Denicolò, Vincenzo
Garella, Paolo
Keywords
International trade, oligopoly, import quotas, VER
Subjects
DOI
Deposit date
26 Apr 2016 08:47
Last modified
26 Apr 2016 08:47
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