Description:
Welfare with the maximum-revenue tariff is compared to free-trade welfare under perfect competition in the case of a large country able to affect its terms of trade; under Cournot duopoly with differentiated products; and under Bertrand duopoly with differentiated products. Under perfect competition, assuming linear demand and supply, welfare with the maximum-revenue tariff will be higher than free-trade welfare if the country has sufficient market power. Under Cournot duopoly and Bertrand duopoly, assuming linear demands and constant marginal costs, welfare with the maximum-revenue tariff is always higher than free-trade welfare.