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Seoul Journal of Economics
[ Article ]
Seoul Journal of Economics - Vol. 12, No. 2, pp.143-155
ISSN: 1225-0279 (Print)
Print publication date 31 May 1999
Received Oct 1997 Revised Feb 1999

The Welfare Effects of Voluntary Export Restraints

Chisato Yoshida
Department of Economics, Okayama University, 3-1-1 Tsushima-Naka, Okayama, 700-8530, Japan, Fax: +81-86-2517571 cyoshida@e.okayama-u.ac.jpyoshida@osk.3web.ne.jp

JEL Classification: F12, L13

Abstract

This paper examines a duopoly model of trade consisting of a home and a foreign firm with conjectural variation approach. It analyzes the effects of voluntary export restraints (VERs) imposed on the foreign firm on the profits of both firms and on the home country’s welfare, when these VERs are lower than the lowest level of imports among free-trade equilibria under conjectural variations. It is found that such VERs increase the home firm's profits, reduce the foreign firm’s profits, and may increase the home country’s welfare under some circumstances.

Acknowledgments

I am very grateful to the late Professor Yasuo Uekawa for his encouragement and suggestions in his life time. Also, I would like to thank Professors Akihiro Amano, Winston W. Chang, Fumio Dei, Ikushi Egawa, Seiichi Katayama, Masao Oda, Hiroshi Ohta, Michihiro Ohyama, Nobuo Teramachi and an anonymous referee for their valuable comments. Moreover, I am indebted to Professor Shinpachi Ishimoto for his assistance. Remaining errors are, of course, mine.

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