TY  - JOUR
AU  - Kolev,Dobrin R.
AU  - Prusa,Thomas J.
TI  - Tariff Policy for a Monopolist Under Incomplete Information
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 6090
PY  - 1997
Y2  - July 1997
UR  - http://www.nber.org/papers/w6090
L1  - http://www.nber.org/papers/w6090.pdf
N1  - Author contact info:
Thomas J. Prusa
Department of Economics
New Jersey Hall
Rutgers University
New Brunswick, NJ 08901-1248
Tel: 908.443.1565
E-Mail: prusa@econ.rutgers.edu
AB  - 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.
ER  -