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Wilfrid Laurier University School of Business & Economics
July 29, 2014
 
 
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Economics

2000-03 EC: The Non-Equivalence of Tariffs and Quotas in a Dynamic Trade Model (working paper)


Konieczny, J., & Waschik, R.

published: 2000 | Research publication | Working Paper - Economics

ABSTRACT:  We provide a novel (and old) argument for the nonequivalence of tariffs and quotas, based on the famous paper by Hotelling (1931). Unlike tariffs, quantitative restrictions are inherently dynamic. As long as the foreign exporter earns positive marginal profits, he raises their present value by frontloading sales. As a result, unlike a tariff, equilibrium with a quota exhibits quantity and price dispersion over time.

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