This paper explores motivations for an importing country imposing discriminatory or uniform tariffs on quality differentiated imports. The purpose is to examine how the import policy and quality choice respond to managerial incentive in turn. In comparison to free trade, both interventions increase
average quality and consumer surplus by a greater amount than the decrease in tariff revenues; accordingly, it increases the domestic welfare. The highest welfare is obtained by practicing a discriminatory tariff, where a high-quality firm pays zero-tariff and a low-quality firm gets quality subsidy. This result brings meaningful support to the WTO initiative for tariff elimination.
The Global Business & Finance Research Conference, 英國, 2011.7.14