Quotas and the Stability of Implicit Collusion

41 Pages Posted: 14 Jul 2000 Last revised: 30 Oct 2022

See all articles by Julio J. Rotemberg

Julio J. Rotemberg

Harvard University, Business, Government and the International Economy Unit (deceased); National Bureau of Economic Research (NBER) (deceased)

Garth Saloner

Stanford Graduate School of Business

Date Written: June 1986

Abstract

This paper shows that the imposition of an import quota by one countrycan lead to increased competitiveness; protection can reduce the price in thecountry that imposes the quota, the foreign country, or both. This emergesfrom a model in which the firms are assumed to sustain collusion by the threatof reversion to more competitive pricing. We consider both prices andquantities as the strategic variables and study competition both in thedomestic and the foreign market taken individually, and in the two marketstaken together.

Suggested Citation

Rotemberg, Julio J. and Saloner, Garth, Quotas and the Stability of Implicit Collusion (June 1986). NBER Working Paper No. w1948, Available at SSRN: https://ssrn.com/abstract=227088

Julio J. Rotemberg (Contact Author)

Harvard University, Business, Government and the International Economy Unit (deceased) ( email )

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United States
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National Bureau of Economic Research (NBER) (deceased)

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Garth Saloner

Stanford Graduate School of Business ( email )

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United States
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