Tariffs and the Extraction of Foreign Monopoly Rents under Potential Entry

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Published in RePEc

Abstract

This paper examines the incentives for using tariffs to extract monopoly rents from imperfectly competitive foreign firms. Using a simple Stackelberg entry deterrence model, the rent-extracting policy is attractive if the foreign firm faces a threat of domestic entry. Despite transportation costs, the Stackelberg leader-follower model can lead to intra-industry trade in the same commodity.

Keywords

TARIFFS TO EXTRACT
FOREIGN MONOPOLY
RENT EXTRACTING
MONOPOLY RENTS
FOREIGN FIRMS
EXTRACTION
POLICY
ENTRY

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