International Finance Discussion Papers (IFDP)
March 1987
International Duopoly with Tariffs
Eric O'N. Fisher and Charles A. Wilson
Abstract:
This paper analyzes the effects of a tariff on price-setting duopolists who cannot segment geographically distinct markets; hence, commercial policy has effects in domestic and foreign markets. Although each firm's payoff function is discontinuous, there is a unique equilibrium for an arbitrary tariff. We find that a tariff serves to increase the profits of both the domestic and foreign producer. Moreover, the profits of both firms rise monotonically with the tariff.
PDF: Full Paper
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