This paper considers the conditions under which tariffs and quotas are equivalent. I examine an oligopoly in which conjectural variations are consistent. I find that quotas eliminate competition from foreign firms, thus altering firms' conjectures, whereas tariffs do not. The results indicate that when the number of domestic firms is more than one, tariffs and quotas are equivalent only under constant marginal costs. When the number is one, they are generally not equivalent.
Get full access to this article
View all access options for this article.
References
1.
BhagwatiJ., (1965): “On the Equivalence of Tariffs and Quotas,” in BaldwinR. E., Trade, Growth and the Balance of Payments—Essays in Honor of G. Haberler, Rand McNally, Chicago.
2.
BhagwatiJ., (1968): “More on the Equivalence of Tariffs and Quotas,”American Economic Review, 58, 142–6.
3.
ChenX., (1993): Imperfect Competition, Trade Patterns, and Trade Policies: Essays on International Trade, Unpublished Dissertation, West Virginia University.
4.
DixitA., (1987): “Optimal Trade and Industrial Policies for the US Automobile Industry,” in FeenstraR., ed., Empirical Methods in International Trade, MIT Press, Cambridge, MA.
5.
FeenstraR., (1988): “Quality Change under Trade Restraints in Japanese Autos,”Quarterly Journal of Economics, 103, 131–46.
6.
HwangH. and MaiC., (1988): “On the Equivalence of Tariffs and Quotas under Duopoly: A Conjectural Variation Approach,”Journal of International Economics, 24, 373–80.
7.
ItohM. and OnoY., (1982): “Tariffs, Quotas and Market Structure,”Quarterly Journal of Economics, 97, 295–305.
8.
ItohM. and OnoY., (1984): “Tariffs vs. Quotas under Duopoly of Heterogeneous Goods, Journal of International Economics, 17, 359–73.
9.
PerryM., (1982): “Oligopoly and Consistent Conjectural Variations,”Bell Journal of Economics, 13, 197–205.
10.
ShibataH., (1968): “A Note on the Equivalence of Tariffs and Quotas,”American Economic Review, 58, 137–42.
