Quotas under dynamic Bertrand competition

We present a dynamic model of Bertrand competition, where a quota is treated as an intertemporal constraint, rather than as a capacity constraint, limiting total quantity of exports during a given period but allowing an exporter to strategically vary the rates of exports over time. We show that a quota results in higher prices than a tariff of equal imports. We also find that firms never play mixed strategies in equilibrium, which contrasts sharply from the result from a one-shot game, in which the only equilibrium under a quota is in mixed strategies (Krishna 1989)