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International duopoly with unknown costs
Author(s) -
Ferreira Fernanda A.,
Pinto Alberto A.
Publication year - 2007
Publication title -
pamm
Language(s) - English
Resource type - Journals
ISSN - 1617-7061
DOI - 10.1002/pamm.200701123
Subject(s) - homogeneous , tariff , unitary state , duopoly , production (economics) , welfare , distribution (mathematics) , economics , microeconomics , production cost , international economics , industrial organization , business , international trade , market economy , mathematics , engineering , mathematical analysis , mechanical engineering , combinatorics , political science , law
We consider two firms, located in different countries, selling the same homogeneous good in both countries. In each country there is a non negative tariff on imports of the good produced in the other country. We suppose that each firm has two different technologies, and uses one of them according to a certain probability distribution. The use of either one or the other technology affects the unitary production cost. We analyse the effect of the production costs uncertainty on the profits of the firms and also on the welfare of the governments. (© 2008 WILEY‐VCH Verlag GmbH & Co. KGaA, Weinheim)