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POTENTIAL PARETO‐IMPROVING MOVE TOWARD MOST FAVORED NATION TARIFFS
Author(s) -
Lahiri Sajal,
Silva Peri
Publication year - 2016
Publication title -
economic inquiry
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.823
H-Index - 72
eISSN - 1465-7295
pISSN - 0095-2583
DOI - 10.1111/ecin.12282
Subject(s) - economics , tariff , pareto principle , microeconomics , oligopoly , unemployment , welfare , revenue , reciprocity (cultural anthropology) , nash equilibrium , pareto optimal , international economics , macroeconomics , multi objective optimization , cournot competition , market economy , computer science , finance , operations management , social psychology , psychology , machine learning
We use a multicountry asymmetric oligopolistic framework for segmented markets to study the welfare effects of reducing tariff discriminations—which we call a move toward Most Favored Nation tariffs. In our basic framework initial tariffs are arbitrary, and we consider unilateral reforms without and with reciprocity/retaliation. We extend the basic framework to allow for revenue constraints, unemployment, and the case where the initial tariffs are at Nash‐optimal levels. We also consider multilateral reforms in the last scenario. Conditions under which such harmonizations are potentially Pareto‐improving are derived and results compared across scenarios. Each scenario makes a significant difference to qualitative results. ( JEL F10, F11, F13, H21, H3, H41)