A Game Theoretic Analysis of Tariffs, Dynamic Inconsistency, Resource Conservation, and Trade

14 Pages Posted: 21 Apr 2005

See all articles by Amitrajeet A. Batabyal

Amitrajeet A. Batabyal

Rochester Institute of Technology (RIT) - Department of Economics

Multiple version iconThere are 2 versions of this paper

Date Written: April 2005

Abstract

Recently, Batabyal and Beladi (2004) have used a Stackelberg differential game model to study trade in a renewable resource between a single buyer and a single seller. The buyer uses a unit tariff to indirectly encourage conservation of the renewable resource and the entire harvest from the resource is exported to the importing nation. In this setting, it is shown that the efficacy of the unit tariff in promoting conservation depends fundamentally on whether harvesting costs are stock dependent or independent. When harvesting costs are stock independent (dependent), the optimal open loop unit tariff is dynamically consistent (inconsistent). Does this result hold when the buyer and the seller consume a portion of the harvest from this resource? We show that the Batabyal and Beladi (2004) result holds even when there is domestic consumption of a portion of the harvest in the exporting country. We conclude by discussing the implications of this finding for renewable resource conservation in general.

Keywords: Conservation, Harvest Cost Function, Renewable Resource, Unit Tariff

JEL Classification: F12, F18, Q20

Suggested Citation

Batabyal, Amitrajeet A., A Game Theoretic Analysis of Tariffs, Dynamic Inconsistency, Resource Conservation, and Trade (April 2005). Available at SSRN: https://ssrn.com/abstract=703823 or http://dx.doi.org/10.2139/ssrn.703823

Amitrajeet A. Batabyal (Contact Author)

Rochester Institute of Technology (RIT) - Department of Economics ( email )

92 Lomb Memorial Drive
Rochester, NY 14623-5604
United States
585-475-2805 (Phone)
585-475-5777 (Fax)

HOME PAGE: http://people.rit.edu/aabgsh

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
78
Abstract Views
959
rank
379,769
PlumX Metrics