Trade restrictions as facilitating practices

Research output: Contribution to journalArticle

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Abstract

The effect of quantitative restrictions in oligopolistic markets is shown to depend on whether imports are substitutes or complements for domestic products. In the former case, they have profound effects even when set at free trade levels because they impede the ability of the foreign firm to compete in the domestic market, thereby acting to facilitate collusion and raise prices and profits. For this reason, tariffs and quotas are fundamentally non-equivalent with substitute goods. When goods are complements, a voluntary export restriction (VER) at the free trade level has no effect, and tariffs and quotas are equivalent.

Original languageEnglish (US)
Pages (from-to)251-270
Number of pages20
JournalJournal of International Economics
Volume26
Issue number3-4
DOIs
StatePublished - May 1989

All Science Journal Classification (ASJC) codes

  • Finance
  • Economics and Econometrics

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