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摘要
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The competition between
firms from developed (DC) and less developed countries (LDC) is typically in
vertically differentiated products. We consider a model of price competition
between DC and LDC firms with quality choice and imitation, and study the
effects of ex post tariffs. The government faces a choice between commitment
to free trade and imposing a tariff. Tariffs can lead to change in the rank
of qualities compared to free trade. We identify conditions under which this
quality reversal takes place, and show that quality reversal is necessary for
trade policy to be superior to free trade in welfare terms.
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