Working Paper: NBER ID: w1872
Authors: Stephen J. Turnovsky
Abstract: This paper analyzes the determination of the optimal tariff under the assumption of Consistent Conjectural Variations (CCV). A general characterization of the CCV equilibrium is given. We show that (i) there are, in general, a multiplicity of such equilibria, and (ii) under certain restrictions, the Cournot equilibrium, which is based on the assumption of no retaliation can also be a CCV equilibrium. By contrast, free trade is never a CCV equilibrium. Finally the CCV equilibrium is solved explicitly in a simple example.
Keywords: Optimal Tariffs; Conjectural Variations; International Trade
JEL Codes: F13
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Assumptions about retaliation (D74) | Optimal tariffs (F13) |
| Tariffs imposed by countries A and B (F14) | Conjectural variations (F12) |
| Free trade (F19) | CCV equilibrium (D50) |
| Conjectural variations (F12) | Optimal tariffs (F13) |
| Elasticity of offer curves (D43) | Equilibrium tariffs (F14) |
| Cournot equilibrium (C72) | CCV equilibrium (D50) |