TY - JOUR
T1 - Trade restrictions as facilitating practices
AU - Krishna, Kala
N1 - Funding Information:
*I am grateful to the Sloan Foundation and to Princeton University for financial support and to Avinash Dixit, Gene Grossman and Vijay Krishna for helpful discussions. An earlier version of this paper appeared as Discussion Paper in Economics no. 55, Woodrow Wilson School of Public and International Affairs, Princeton University, October 1983; a later version appeared as NBER Working Paper no. 1546, January 1985. Since this paper was written, independent work by R. Harris on the same subject has been published in the Canadian Journal of Economics, November 1985.
PY - 1989/5
Y1 - 1989/5
N2 - 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.
AB - 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.
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U2 - 10.1016/0022-1996(89)90003-2
DO - 10.1016/0022-1996(89)90003-2
M3 - Article
AN - SCOPUS:45149141705
SN - 0022-1996
VL - 26
SP - 251
EP - 270
JO - Journal of International Economics
JF - Journal of International Economics
IS - 3-4
ER -