Open Daily: 10am - 10pm | Alley door pickup 10am - 7pm 3038 Hennepin Ave Minneapolis, MN
612-822-4611

  • Open Daily: 10am - 10pm
    Alley-side Pickup: 10am - 7pm

    3038 Hennepin Ave Minneapolis, MN
    612-822-4611

Open Daily: 10am - 10pm | Alley-side Pickup: 10am - 7pm
3038 Hennepin Ave Minneapolis, MN
612-822-4611
Market Share Quotas

Market Share Quotas

Penny Hill Press Inc
Federal Trade Commission

Paperback

Business General

ISBN10: 1523438657
ISBN13: 9781523438655
Publisher: Createspace
Published: Jan 17 2016
Pages: 32
Weight: 0.22
Height: 0.07 Width: 8.50 Depth: 11.02
Language: English
Anecdotal evidence reveals that an import quota is not always filled when the quota is specified in terms of a market-share limit instead of a quantity limit. In a simple Cournot duopoly, we provide a theoretical rationale for this outcome. Imposing a market-share quota eliminates pure strategy equilibria. Instead, a mixed-strategy equilibrium arises where only the domestic firm mixes choices. The quota is binding under one of the two equilibrium domestic strategies, but it is not binding under the other. Compared to a tariff that restrains the foreign market share to an equivalent level, domestic profits are always higher and consumer surplus is always lower under the market-share quota. Social welfare is lower under the market-share quota when the domestic firm uses its constrained strategy, but this outcome may be reversed when the domestic firm uses its unconstrained strategy. These results may continue to hold when the foreign firm can move output costlessly between markets.

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