We present a new model of dynamic Bertrand competition, where a quota is treated as an intertemporal constraint, rather than as a capacity constraint. The firm under a quota then can still vary the rates of exports over time, provided that its annual sales do not exceed the quota. 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 from the result of a one-shot game, in which the only equilibrium under a quota is in mixed strategies (Krishna 1989).
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Kaz, M., Yuka, O. (2009). Quotas Under Dynamic Bertrand Competition. In: Kamihigashi, T., Zhao, L. (eds) International Trade and Economic Dynamics. Springer, Berlin, Heidelberg. https://doi.org/10.1007/978-3-540-78676-4_19
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DOI: https://doi.org/10.1007/978-3-540-78676-4_19
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