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The Dynamics of Discriminatory Import Policy

For this project, I plan to consider the welfare effect of discriminatory import policy in a dynamic setting. Although the General Agreement on Trade and Tariffs prohibits discriminatory import tariffs, GATT rules include means by which this prohibition can be circumvented. The existing literature argues that such discrimination improves domestic social welfare. This is misleading because it does not take into consideration important dynamic factors. For example, if past market shares are important, then the expectation of discriminatory tariffs can have an adverse effect of the incentive to compete. I will address this issue using a model of consumer switching costs.




Ted To, "Dynamics and Discriminatory Import Policy", CSGR Working Paper 07/98, May 1998 Abstract, Full Document PDF icon. Published in 1999, Canadian Journal of Economics, 32(4), 1072–83.