Competition and the Equivalence of Tariffs and Quotas

Abstract

This paper considers the conditions under which tariffs and quotas are equivalent. I examine an oligopoly in which conjectural variations are consistent. I find that quotas eliminate competition from foreign firms, thus altering firms' conjectures, whereas tariffs do not. The results indicate that when the number of domestic firms is more than one, tariffs and quotas are equivalent only under constant marginal costs. When the number is one, they are generally not equivalent.