A rationale for meeting quotas asymmetrically

Research paper by J. Patrick Meister, Robert S. Main

Indexed on: 01 Dec '02Published on: 01 Dec '02Published in: Atlantic Economic Journal


Under certain conditions, otherwise identical, competing firms may find it jointly preferable to face differing degrees of trade barriers on individual products rather than symmetric trade barriers. The key is the ability to reduce marginal production cost via research and development. The economic significance of this insight is that there could be a role for a market for quota allotments. This insight also has applications to Voluntary Export Restraints in which a priori symmetric, restricted firms may prefer to have individual production levels allocated asymmetrically. This indicates the need for detailed studies of how quotas are met by individual firms.