Premium
On the Equivalence of Ad Valorem Tariffs and Specific Tariffs under Duopoly *
Author(s) -
Shea Koon Lam,
Shea Esther Y. P.
Publication year - 2006
Publication title -
review of international economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.513
H-Index - 58
eISSN - 1467-9396
pISSN - 0965-7576
DOI - 10.1111/j.1467-9396.2006.00593.x
Subject(s) - duopoly , ad valorem tax , tariff , economics , microeconomics , pareto principle , equivalence (formal languages) , value (mathematics) , international economics , mathematics , public economics , tax reform , cournot competition , operations management , statistics , discrete mathematics
Using a quantity conjectural variation model, this paper examines whether an ad valorem tariff and a specific tariff are equivalent under duopoly. We show that if the average per‐unit import tax is the same for the two tariffs, domestic output will be smaller while foreign output will be larger under an ad valorem tariff. We further show that for any value of a specific tariff, there is a Pareto‐superior ad valorem tariff for all values of conjectural variation except in the case of perfect competition where the two tariffs are equivalent.