Global Supply Chain Networks and Tariff Rate Quotas: Equilibrium Analysis with Application to Agricultural Products

Journal of Global Optimization (2019), 75(2), pp 439-460

30 Pages Posted: 16 Mar 2020

See all articles by Anna Nagurney

Anna Nagurney

University of Massachusetts Amherst - Isenberg School of Management - Department of Operations and Information Management

Deniz Besik

University of Massachusetts Amherst - Isenberg School of Management - Department of Operations and Information Management

Ladimer S. Nagurney

University of Hartford - Department of Electrical and Computer Engineering

Date Written: June 1, 2019

Abstract

In this paper, we develop a global supply chain network model in which profit-maximizing firms engage in competition in the production and distribution of products in the presence of quantitative trade policy instruments in the form of tariff rate quotas. Tariff rate quotas are two-tiered tariffs, in which a lower in-quota tariff is applied to the units of imports until a quota or upper bound is attained and then a higher over-quota tariff is applied to all subsequent imports. They are utilized to protect domestic producers in the case of a wide range of products, from agricultural ones to fabrics and even steel, and can be challenging to formulate. We construct the governing set of novel equilibrium conditions associated with the product flows and Lagrange multipliers, which correspond to quota rent equivalents, and derive the variational inequality formulation. Qualitative properties are presented along with an effective algorithm, which is then applied to compute solutions to numerical examples comprising an agricultural product case study on avocados and global trade. This work is the first to model and solve general, competitive supply chain network problems consisting of oligopolistic firms with multiple production sites and demand markets in multiple countries subject to tariff rate quotas.

Keywords: supply chains; tariff rate quotas; global trade; networks; variational inequalities; agricultural products

Suggested Citation

Nagurney, Anna and Besik, Deniz and Nagurney, Ladimer S., Global Supply Chain Networks and Tariff Rate Quotas: Equilibrium Analysis with Application to Agricultural Products (June 1, 2019). Journal of Global Optimization (2019), 75(2), pp 439-460, Available at SSRN: https://ssrn.com/abstract=3538950

Anna Nagurney

University of Massachusetts Amherst - Isenberg School of Management - Department of Operations and Information Management ( email )

Amherst, MA 01003-4910
United States

Deniz Besik (Contact Author)

University of Massachusetts Amherst - Isenberg School of Management - Department of Operations and Information Management ( email )

Amherst, MA 01003
United States
01003 (Fax)

Ladimer S. Nagurney

University of Hartford - Department of Electrical and Computer Engineering ( email )

West Hartford, CT 06117
United States

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