Optimum Tariffs and Retaliation Revisited: How Country Size Matters

• Published in: The Review of economic studies Vol. 69; no. 3; pp. 707 - 727
• Main Author: Syropoulos, Constantinos
• Format: Journal Article
• Language: English
• Published: Wiley-Blackwell 01.07.2002; Review of Economic Studies Ltd
• Subjects: Elasticity of demand; Endowments; F13; Free trade; Nash equilibrium; Price elasticity; Retaliation; Tariffs; Terms of trade; Trade policy; War

In his seminal work on tariff retaliation, Johnson (Review of Economic Studies, 21, 1953–1954) showed that a country will “win” a bilateral “tariff war” if its relative monopoly/monopsony power in world trade is sufficiently large. However, it is unclear from Johnson's analysis and from subsequ...