Tariffs and quotas under dynamic duopolistic competition

This paper analyzes tariffs and quotas in a differential game model of duopolistic competition. For a homogeneous good, equal import tariffs and quotas are compared with respect to resulting domestic prices. The open-loop and closed-loop (subgame perfect) equilibria are derived. The open-loop game leads to domestic price equivalence; however, the closed-loop game does not, unless firms are myopic or the number of domestic firms becomes large. Thus, we prove that the equivalence for static Cournot competition does not carry over to the dynamic case.