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International Finance Discussion Papers
The International Finance Discussion Papers logo links to the International Finance Discussion Papers home page International Duopoly with Tariffs
Eric O'N. Fisher and Charles A. Wilson
1987-308  (March 1987)

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.

Full paper(383 KB PDF)

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