Export Restraints and Horizontal Product Differentiation.

We consider the effects of export restraints on price competition in the Hotelling model of horizontal product differentiation. We characterise the Nash equilibrium for all possible values of the quota and compare our results with those of Krishna. We show that a foreign producer would choose a voluntary Export Restraint in he vicinity of the Free Trade Equilibrium. In order to maximise domestic welfare, a government would not necessarily choose complete protectionism nor free trade.