Quotas Under Dynamic Bertrand Competition

31 Pages Posted: 18 Aug 2008 Last revised: 11 Oct 2008

See all articles by Kaz Miyagiwa

Kaz Miyagiwa

Emory University - Department of Economics; Osaka University - Institute of Social and Economic Research (ISER); Florida International University (FIU) - Department of Economics

Yuka Ohno

affiliation not provided to SSRN

Date Written: August 1, 2008

Abstract

We present a new model of dynamic Bertrand competition, where a quota is treated as an intertemporal constraint rather than as a capacity constraint as is common in the literature. The firm under a quota then can still vary the rates of exports over time provided that its total sales within the period do not exceed the quota. We show that a quota results in higher prices than a tariff of equal imports. We also show that firms never play mixed strategies, which contrasts from the result from a one-shot game, in which the only equilibrium under a quota is in mixed strategies.

Keywords: Dynamic Bertrand competition, quotas, tariffs, differential game

JEL Classification: F13

Suggested Citation

Miyagiwa, Kaz and Ohno, Yuka, Quotas Under Dynamic Bertrand Competition (August 1, 2008). ISER Discussion Paper No. 718. Available at SSRN: https://ssrn.com/abstract=1232746 or http://dx.doi.org/10.2139/ssrn.1232746

Kaz Miyagiwa (Contact Author)

Emory University - Department of Economics ( email )

1602 Fishburne Drive
Atlanta, GA 30322
United States

Osaka University - Institute of Social and Economic Research (ISER) ( email )

6-1 Mihogaoka
Ibaraki Osaka 567-0047
Japan

Florida International University (FIU) - Department of Economics ( email )

Miami, FL 33199
United States

Yuka Ohno

affiliation not provided to SSRN ( email )

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