More on the Equivalence of Tariffs and Quotas

In an earlier paper on the equivalence of tariffs and quotas [1], I argued that this equivalence – defined such that a tariff would lead to a level of imports which, if alternatively set as a quota, would generate the same implicit tariff – followed from the assumptions of competitive domestic production, supply of imports, and holding of quotas. This universality of competitiveness sufficed to guarantee equivalence, as defined. It was further argued that a departure from these assumptions could, in general, destroy this equivalence and several such departures were analyzed: (1) perfect competition in domestic production replaced by pure monopoly in production; (2) perfect competition among quota-holders replaced by monopolist-holding of quota; and (3) simultaneous presence of monopoly in quota-holding and in domestic production [1, p. 54]. Recent communications, however, from Hirofumi Shibata [ 2] who has analyzed the case where there is monopolistic supply of imports, and from G. Yadav [ 3] who has analyzed the case where there is monopolistic import under both tariffs and quotas, have suggested the following clarifications and extensions of some importance