TARIFF POLICY AND WELFARE IN AN INTERNATIONAL DUOPOLY WITH CONSUMER-FRIENDLY INITIATIVE

Authors


Leonard F. S. Wang, Department of Applied Economics, National University of Kaohsiung, Kaohsiung 811, Taiwan, R.O.C. Tel: +886-7-5919322; Fax: +886-7-5919320; Email: lfswang@nuk.edu.tw.

ABSTRACT

The purpose of this paper is to explore how strategic tariff policy and welfare are affected by the consumer-friendly initiative of foreign exporting firms. We define a firm that is consumer-friendly or non-profit-based if it considers both its own profit and consumer surplus. This paper extends Brander and Spencer by taking the consideration of consumer-friendly firms into an international duopoly, and within such context examining the tariff policy and welfare. The consumer-friendly initiative that leads to trade liberalization is a ‘Win-Win-Win’ solution in the sense that it is not only beneficial for foreign exporting firms, but also for the government and consumers of the importing country.

Ancillary