On the Equivalence of <i>Ad Valorem</i> Tariffs and Specific Tariffs under Duopoly

Using a quantity conjectural variation model, this paper examines whether an <i>ad valorem</i> tariff and a specific tariff are equivalent under duopoly. We show that if the average per-unit import tax is the same for the two tariffs, domestic output will be smaller while foreign output will be larger under an <i>ad valorem</i> tariff. We further show that for any value of a specific tariff, there is a Pareto-superior <i>ad valorem</i> tariff for all values of conjectural variation except in the case of perfect competition where the two tariffs are equivalent. Copyright © 2006 The Authors; Journal compilation © 2006 Blackwell Publishing Ltd.