Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/85575
Authors: 
Moraga, Jose Luis
Viaene, Jean-Marie
Year of Publication: 
1999
Series/Report no.: 
Tinbergen Institute Discussion Paper 99-094/2
Abstract: 
We study the optimal trade policy against a foreign oligopoly withendogenous quality. We show that, under the Most Favoured Nation(MFN) clause, a uniform tariff policy is always welfare improvingover the free trade equilibrium. However, a nonuniform tariff policyis always desirable on welfare grounds. First best policy typicallyconsists of setting a subsidy on the low-quality product and a tax onhigh-quality one. Another example of such a nonuniform tariff policyis a Regional Trade Agreement (RTA). We show that, if a welfareimprovement is possible through a RTA, it is always with the low-quality producing country that it has to be achieved.
Subjects: 
Endogenous Quality
Hedonic Prices
Most Favored Nation (MFN) clause
Optimal Tariff
Regional Trade Agreement (RTA)
JEL: 
F12
F13
F15
Document Type: 
Working Paper

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