WELFARE EFFECTS OF TARIFFS IN FREE-ENTRY OLIGOPOLY UNDER INTEGRATED MARKETS*

Abstract

In this paper I examine the welfare effects of tariffs in international free-entry oligopolies under integrated markets in a two-country world model. I shall show that a small specific (or ad-variorum) tariff imposed by the home country exercises the same welfare effect as a small specific (or ad-variorum) tariff imposed by the foreign country in a free trade equi librium.These unilateral specific (or ad-variorum) tariffs and reciprocal specific (or ad variorum)tariffs make the home and the foreign countries better off if demand functions of oligopolistic goods are concave (or concave or linear). (TEL No. 411, 611)