The Nonequivalence of Import and Export Quotas in Strategic Equilibrium

8 Pages Posted: 2 Apr 2004

See all articles by Harvey E. Lapan

Harvey E. Lapan

Iowa State University - Department of Economics

Jean Gervais

Université Laval

Abstract

The authors use a standard general-equilibrium trade model to show that export and import policies are not symmetric in the equilibrium of a strategic game with quotas. It is assumed that N (identical) large countries, without cooperation, set their import (or export) quotas to maximize domestic welfare. It is shown that the equilibrium in which all countries use import quotas differs from, and is superior to, the equilibrium in which countries use export quotas. The difference arises because the elasticity of the residual foreign export supply schedule differs between the two equilibria. The authors also study the properties of the sequential equilibrium of the game. In a simultaneous-move game, each country is indifferent as to whether it uses an import or export quota, given the policy of the other country. However, in a sequential-move game, the first mover will prefer to use an import quota rather than an export quota.

Suggested Citation

Lapan, Harvey E. and Gervais, Jean-Philippe, The Nonequivalence of Import and Export Quotas in Strategic Equilibrium. Available at SSRN: https://ssrn.com/abstract=513994

Harvey E. Lapan (Contact Author)

Iowa State University - Department of Economics ( email )

260 Heady Hall
Ames, IA 50011
United States
515 294-5917 (Phone)

Jean-Philippe Gervais

Université Laval ( email )

4415 Comtois
Quebec, Quebec G1K 7P4
Canada
418-656-2131 x 2122 (Phone)
418-656-7821 (Fax)

HOME PAGE: http://www.ulaval.ca/vrr/rech/Cherc/812121.html

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