Konstantine Gatsios

Preferential tariffs and the 'most favoured nation' principle: A note

Abstract The aim of this note is to suggest a simple explanation of the need for an international agreement like the ‘Most Favoured Nation’ (M.F.N.) principle, concerning the uniformity of import tariffs. It is shown that preferential import tariffs can be the optimal outcome of non-cooperative behaviour by trading countries and, therefore, it is argued that the existence of the M.F.N. principle reflects the incentive of each country to otherwise pursue discriminatory tariff policies. Although the M.F.N. principle is well justified in terms of production efficiency, its distributional effects favour the more cost-efficient countries.

Delegation in a general equilibrium model of customs unions

Abstract A difference in the objectives of members of a customs union may be a unifying rather than a divisive force. If countries outside the union behave strategically, one union member may want to delegate to its partner the ability to set the common external tariff. We demonstrate these results in the context of a pure exchange general equilibrium trade model. We show that if tariffs are strategic substitutes the union country which is relatively less well endowed in the exported good may be willing to delegate to its partner, which behaves more aggressively in setting the unions policy. The delegation decision is reversed if tariffs are strategic complements. The model extends the standard results on the appropriate level of the union policy by adding another dimension: that of the optimal decision-making agent.

HOW ANTI-MERGER LAWS CAN REDUCE INVESTMENT, HELP PRODUCERS, AND HURT CONSUMERS*

If capital lowers marginal cost and a firm with more capital gets a bigger share of the surplus in merger bargaining, then the equilibrium price with a merger may be lower than without a merger. If entry is restricted, the level of industry profits minus investment costs may be higher if mergers are prohibited. Thus, a regulatory climate that permits mergers may harm firms and benefit consumers. Copyright 1992 by Blackwell Publishing Ltd.

The Welfare Effects of Imperfect Harmonization of Trade and Industrial Policy

Partial cooperation in setting trade and industrial policies may not benefit members of a customs union if exporters outside the union react aggressively. Even if the union comprises the entire noncompetitive sector of industry, cooperation on trade policy may be disadvantageous if industrial policy (e.g., investment subsidies) are chosen noncooperatively; cooperation in trade policy may exacerbate the inefficiencies created by noncooperation in investment. Cooperation in choosing trade policies may also encourage investment by competitive importers and, thus, reduce the demand faced by the oligopolists; this may more than offset the ex post benefits of cooperation. Copyright 1992 by Royal Economic Society.

Trade Policy and Market Structure.

Part 1 Introduction: trade policy and market power strategic effects production efficiency the political economy of the new theory organization. Part 2 Trade policy under perfect competition: tariff analysis import quotas export subsidies and taxes optimal trade taxes a note on general equilibrium domestic distortions and trade policy algebra for small policy changes. Part 3 Protection and domestic market power: the case of an import-competing Monopolist noncooperative domestic oligopoly collusive domestic oligopoly. Part 4 Foreign market power: optimal policies against a foreign monopolist trade taxes quotas optimal trade taxes kinked demand Cournot oligopoly Bertrand oligopoly ad valorem trade taxes quotas under oligopoly appendix to section 4.9. Part 5 Strategic export policy: competitive foreign conduct profit shifting price competition entry with increasing returns resource constraints two-way export policies consumption effects. Part 6 Strategic import policy: tariffs - the Cournot case tariffs - the Bertrand case import quotas. Part 7 Intraindustry trade: a basic monopolistic competition model tariffs and the terms of trade the production efficiency effect tariffs that lower prices - the home market effect tariffs and segmented markets. Part 8 Quantification: problems of quantification models with fixed numbers of firms models with free entry general equilibrium modeling. Part 9 Conclusions: methodology surprising effects of policy the welfare effects of trade policy where do we go from here?