Tariffs versus Quotas under Duopoly: A Conjectural Variation Approach Revisited

Abstract

Uses a conjectural variation approach to derive a general result concerning the equivalence of tariffs and quotas. Shows that, as long as the quota is binding, the equivalence of tariffs and quotas depends exclusively on the domestic firm′s conjectural variations. Specifically, the domestic prices of the goods under the quota are higher than, identical to, or lower than those under the tariff if the domestic firm′s conjectural variation under the quota is larger than, equal to, or smaller than that under the tariff. This conclusion holds for both price‐setting and quantity‐setting duopoly with heterogeneous goods as well as quantity‐setting duopoly with homogeneous goods.

Citation

Tsai, P. and An Chen, J. (1994), "Tariffs versus Quotas under Duopoly: A Conjectural Variation Approach Revisited", Journal of Economic Studies, Vol. 21 No. 2, pp. 57-67. https://doi.org/10.1108/01443589410062995