The discussion that follows develops the motives for tariff redundancy in both the passive state and active state models, and suggests ways of comparing the two approaches.
In this simple vote-buying framework the producer interest can be interpreted as the Stackelberg leader and C(t) as a government reaction function.(11) Tariff redundancy does not depend on risk aversion by the producer interest.
The producer interest's optimal tariff unambiguously rises.(12) Thus the penchant for ex ante tariff redundancy should be reinforced, ceteris paribus, in industries in which the variance of the world price is relatively high.
For a given tariff, t, the probability of observing ex post tariff redundancy is the cumulative density function for world price realizations above P* - t.
I have assumed no supply response and no gains from protection in the non-stochastic case in order to focus on the role of world price uncertainty alone as a motive for tariff redundancy.