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Tariffs for a foreign monopolist under incomplete information

Collie, David Robert and Hviid, Morten 1994. Tariffs for a foreign monopolist under incomplete information. Journal of International Economics 37 (3-4) , pp. 249-264. 10.1016/0022-1996(94)90048-5

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When the domestic government is better informed about demand in the domestic market than a foreign monopolist that exports to the domestic market, the domestic government can use its tariff to signal about demand. In the signalling equilibrium, the domestic government uses a tariff which is larger than the optimal tariff under complete information. However, it is possible that welfare in the signalling equilibrium is lower than welfare when the domestic government is uncertain about demand. The domestic government can avoid the cost of signalling by delegating tariff-setting to a revenue-maximising agent.

Item Type: Article
Date Type: Publication
Status: Published
Schools: Business (Including Economics)
Publisher: Elsevier
ISSN: 0022-1996
Last Modified: 04 Jun 2017 06:37

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