NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Tariff Policy for a Monopolist Under Incomplete Information

Dobrin R. Kolev, Thomas J. Prusa

NBER Working Paper No. 6090
Issued in July 1997
NBER Program(s):   ITI

We examine the incentives for a government to levy an optimal tariff on a foreign monopolist. With complete information, the home government uses tariffs to extract rents and therefore implements a policy of discriminatory tariffs entailing higher tariffs on more efficient firms. By contrast if the government is incompletely informed about costs, we show that under reasonable conditions the unique self-enforcing outcome involves pooling where firms export the same quantity regardless of efficiency. Due to the distortions created by incomplete information we find that in general, home country welfare is higher under a policy of uniform tariffs than under one of discriminatory tariffs. Our results suggest that trade policies that are motivated by rent extraction are unlikely to be robust to the introduction of incomplete information.

download in pdf format
   (335 K)

email paper

This paper is available as PDF (335 K) or via email.

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w6090

Published: Journal of International Economics, Vol. 49 (1999): 51-76.

Users who downloaded this paper also downloaded these:
Brander w5020 Strategic Trade Policy
 
Publications
Activities
Meetings
NBER Videos
Data
People
About

Support
National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us