The Relative Inefficiency of Quotas: The Cheese Case
Abstract
The nonequivalence of tariffs and quotas under a wide variety of circumstances is well established in economic theory. This study considers heterogeneity as a source of nonequivalence and demonstrates its practical importance. Where restriction is inevitable, the bias of economists in favor of price instruments is not thoroughly grounded; this study should help provide a foundation. The point of departure from the equivalence model is differentiation of products.
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