When it comes to trade policy, there is a frequent inherent conflict
between domestic producers and domestic consumers. Increased imports
cause a downward pressure on domestic prices and, hence, improve
domestic consumer welfare while diluting domestic producer profits. Here
the implications of an import quota in an oligopolistic market à la Cournot
are examined. In a lobbying contest between the two interest groups,
consumers and producers, their relative political contributions determine the
probabilities of the policy-maker choosing their respective bliss points: free
trade or autarky. We find that as the number of foreign competitors in the
domestic market increases, the policymaker receives more contributions and
the probability of winning shifts in favor of domestic consumers.
JEL Classification: C72, D43, F12, F13, L13
Keywords: Cournot Oligopoly, Foreign Competition, Consumer Surplus,
Producer Surplus, Trade Policy, Contest