The effects of tariffs on the whole milk powder trade between Brazil and Argentina: a game theoretic analysis

Abstract

In this paper we analyzed the effects of tariffs on the whole milk powder trade between Brazil and Argentina from 1990 to 2004. The methodology included estimation of whole milk powder demands for Brazil and Argentina as monopolists, members of Mercosul, and world exporters; and simulation of Cournot games considering the trade of this product under alternative tariff policies. The results show that although the tariff impositions create trade distortions, this kind of policy was important to protect Brazil against illegal practices of trade and to increase its competitiveness against traditional international competitors.