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Optimal Tariffs on Exhaustible Resources: The Case of a Quantity Setting CartelKenji FujiwaraKobe University - Graduate School of Economics Ngo Van LongMcGill University - Department of Economics; CESifo (Center for Economic Studies and Ifo Institute for Economic Research) January 31, 2012 CESifo Working Paper Series No. 3721 Abstract: We formulate a dynamic game model of trade in an exhaustible resource with a quantity-setting cartel. We compute the feedback Nash equilibrium and two Stackelberg equilibria under two different leadership scenarios: leadership by the strategic importing country, and leadership by the exporting cartel. We numerically show that as compared to the Nash equilibrium, both players are better off if the importing country is the leader. The follower is worse off if the exporting cartel is the leader. Among the three game-theoretic outcomes, the world welfare is highest under the importing country's leadership and lowest under the exporting country’s leadership.
Number of Pages in PDF File: 23 Keywords: dynamic game, exhaustible resource, Stackelberg leadership, optimal tariff JEL Classification: C730, L720, Q340, F180 working papers seriesDate posted: February 5, 2012Suggested CitationContact Information
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