Maximum-revenue tariff under Bertrand duopoly with unknown costs

• Autor(a) principal: Ferreira, Fernanda A.
• Data de Publicação: 2009
• Outros Autores: Ferreira, Flávio
• Tipo de documento: Artigo
• Idioma: eng
• Título da fonte: Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos)
• Texto Completo: http://hdl.handle.net/10400.22/4397
• topic: Game theory; Industrial organization; Optimization; Bertrand model; Tariffs; Uncertainty

This paper considers an international trade under Bertrand model with differentiated products and with unknown production costs. The home government imposes a specific import tariff per unit of imports from the foreign firm. We prove that this tariff is decreasing in the expected production costs of the foreign firm and increasing in the production costs of the home firm. Furthermore, it is increasing in the degree of product substitutability. We also show that an increase in the tariff results in both firms increasing their prices, an increase in both expected sales and expected profits for the home firm, and a decrease in both expected sales and expected profits for the foreign firm.