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The Perverse Effects of A Variable Oil Import Fee

David R Henderson

Year: 1989
Volume: Volume 10
Number: Number 4
DOI: 10.5547/ISSN0195-6574-EJ-Vol10-No4-10
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Abstract:
If the world oil market is at all monopolistic, then a variable import fee (VIF) has more perverse effects than a flat import fee on the country that imposes it. Like an import quota, a VIF makes the importing country's demand for oil less elastic and increases the price paid by buyers in that country. Moreover, a VIF does not necessarily yield any tariff revenue to the country that imposes it. Finally, under very plausible conditions, a VIF may facilitate price discrimination by a monopolistic foreign producer against the country that imposes it.



VIF Vivit: Reply to Henderson

S. Fred Singer

Year: 1989
Volume: Volume 10
Number: Number 4
DOI: 10.5547/ISSN0195-6574-EJ-Vol10-No4-11
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Abstract:
Henderson's main conclusions are incorrect. Oil is a fungible substance, and therefore price discrimination is not possible. (Some argue, however, that there is evidence the world oil market is segmented, and that a degree of price discrimination therefore is possible; Weiner, 1984). Consequently, a variable import fee (VIF) imposed on imported oil will shield the US economy from short-lived price collapses, as intended - and at the same time garner modest revenues for the Treasury.



VIF Mortis Est: A Rejoinder to Singer

David R Henderson

Year: 1989
Volume: Volume 10
Number: Number 4
DOI: 10.5547/ISSN0195-6574-EJ-Vol10-No4-12
View Abstract

Abstract:
S. Fred Singer claims that my first three cases (in which there are no foreign demanders) are hardly realistic because price discrimination is impossible. Singer is correct about the realism of these cases: foreign demanders, after all, do exist. Nevertheless these cases are important for understanding the impact of a variable import fee. The bottom line-which Singer does not apparently dispute - is that if foreign oil producers have some degree of monopoly power, then a VIF will raise not only the price paid by domestic consumers but also the price charged by foreign producers.





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