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OPTIMUM‐WELFARE AND MAXIMUM‐REVENUE TARIFFS IN MIXED OLIGOPOLY WITH FOREIGN COMPETITORS
Author(s) -
WANG LEONARD F.S.,
WANG JEAN,
LEE JENYAO
Publication year - 2010
Publication title -
australian economic papers
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.351
H-Index - 15
eISSN - 1467-8454
pISSN - 0004-900X
DOI - 10.1111/j.1467-8454.2010.00387.x
Subject(s) - cournot competition , oligopoly , tariff , stackelberg competition , competitor analysis , revenue , competition (biology) , microeconomics , economics , welfare , economic surplus , government revenue , international economics , business , industrial organization , market economy , finance , ecology , management , biology
This paper re‐examines the important tariff ranking issue under a linear mixed oligopoly model with foreign competitors and asymmetric costs. We demonstrate that under Cournot competition, when the size of domestic private and foreign private firms become more unequally distributed, optimum‐welfare tariff will exceed maximum‐revenue tariff. We also show that under Stackelberg competition, when the domestic government protects its domestic sector, it will levy higher optimum‐welfare tariffs versus maximum‐revenue tariffs; however, when it decides to open its doors more for foreign competitors, it will need to levy higher maximum‐revenue tariffs versus optimum‐welfare tariffs. The above results remain valid whether the domestic public firm acts as a leader or a follower.