Working Paper: NBER ID: w1948
Authors: Julio J. Rotemberg; Garth Saloner
Abstract: This paper shows that the imposition of an import quota by one country \ncan lead to increased competitiveness; protection can reduce the price in the \ncountry that imposes the quota, the foreign country, or both. This emerges \nfrom a model in which the firms are assumed to sustain collusion by the threat \nof reversion to more competitive pricing. We consider both prices and \nquantities as the strategic variables and study competition both in the \ndomestic and the foreign market taken individually, and in the two markets \ntaken together.
Keywords: import quotas; implicit collusion; market competition; oligopoly
JEL Codes: D43; F12; L13
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Quota (Domestic) (D45) | Reduced foreign punishment ability (F52) |
| Reduced foreign punishment ability (F52) | Increased domestic competition (L49) |
| Quota (Domestic) + Capacity Constraint (D24) | Increased competition abroad (F69) |
| Quota (Domestic) (D45) | Increased domestic competition (L49) |