Price competition between two international firms facing tariffs
نویسندگان
چکیده
This paper examines the effects of tariffs on price-setting duopolists selling a homogeneous product. The producers cannot segment geographically distinct mar kets. It provides a complete characterization of the equilibrium (mixed) strategies and analyzes the pattern of competition for different tariffs. If a country raises its tariff, the profits of both producers increase, although the protected firm typically benefits more than its foreign counterpart. Growth in one market may reduce the profits of the firm located in the other market.
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