Tariffs and subsidies under asymmetric oligopoly: Ad valorem versus specific instruments

Collie, David Robert ORCID: https://orcid.org/0000-0002-3132-648X 2006. Tariffs and subsidies under asymmetric oligopoly: Ad valorem versus specific instruments. The Manchester School 74 (3) , pp. 314-333. 10.1111/j.1467-9957.2006.00495.x

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Abstract

This paper analyses the welfare effects of ad valorem and specific trade policy instruments (import tariffs and production subsidies) under asymmetric Cournot oligopoly and then compares the efficiency of ad valorem with specific instruments. It is shown that these trade policy instruments have rationalization effects similar to those in Collie (European Journal of Political Economy, Vol. 9 (1993), pp. 275–280), and that an ad valorem production subsidy will have an additional negative rationalization effect. Also, it is shown that an ad valorem production subsidy yields lower welfare than a specific production subsidy due to this additional negative rationalization effect, and that combining ad valorem and specific instruments yields welfare gains.

Item Type:	Article
Date Type:	Publication
Status:	Published
Schools:	Business (Including Economics)
Subjects:	H Social Sciences > HB Economic Theory J Political Science > JA Political science (General)
Publisher:	Wiley
ISSN:	1463-6786
Last Modified:	21 Oct 2022 10:58
URI:	https://orca.cardiff.ac.uk/id/eprint/41973

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