Tariffs as signals of uncompetitiveness

David R. Collie, Morten Hviid

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13 Citations (Scopus)


In this paper, a domestic and a foreign firm compete as Cournot duopolists in the domestic market. The foreign firm has incomplete information about the costs of the domestic firm, but the domestic government and the domestic firm are completely informed. It is shown that the domestic government can use its tariff to signal about the costs of the domestic firm. In the separating equilibrium, the domestic government signals the uncompetitiveness of the domestic firm by setting a lower tariff than is optimal under complete information.
Original languageEnglish
Pages (from-to)571-579
Number of pages9
JournalReview of International Economics
Issue number4
Publication statusPublished - Nov 1999


  • competitiveness
  • tariff structure
  • theoretical study
  • trade relations

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