ECON 326: International Trade
Interactive Learning Games
This simulation focuses on trade policy in a small open economy, highlighting the effects of tariffs and quotas.
1. ☕ Coffee Tariff & Quota Game
Analyze how trade policies affect market outcomes in a small country setting. This simulation allows you to compare ad valorem tariffs and import quotas and understand how they shape prices, quantities, and welfare.
What you will learn:
- Small Country Assumption: World prices are taken as given
- Ad Valorem Tariffs:
- Increase domestic prices above the world price
- Reduce import quantities
- Generate government revenue
- Import Quotas:
- Restrict import quantities directly
- Create quota rents instead of government revenue
- Outcomes depend on who receives the quota licenses
Key Learning Concepts:
- Welfare Decomposition: Consumer loss, producer gain, government revenue
- Deadweight Loss: Efficiency losses from trade restrictions
- Quota Rents: How rents arise and why their distribution matters
- Tariff vs Quota Comparison: Same import restriction, different income distribution
How to use: Set tariff rates or quota levels and observe how equilibrium outcomes change. Compare welfare components across policies, and analyze how results differ depending on who captures quota rents.