A Differential Game Theoretic Analysis of International Trade in Renewable Resources

24 Pages Posted: 28 Jan 2007

See all articles by Amitrajeet A. Batabyal

Amitrajeet A. Batabyal

Rochester Institute of Technology (RIT) - Department of Economics

Hamid Beladi

University of Texas at San Antonio - College of Business - Department of Economics

Multiple version iconThere are 2 versions of this paper

Date Written: January 2007

Abstract

We use a Stackelberg differential game to model trade in renewable resources between a monopsonistic buyer and a monopolistic seller. The buyer uses unit and ad valorem tariffs to indirectly encourage conservation of the resource under study. First, we show that the efficacy of these tariffs in furthering conservation depends essentially on whether harvesting costs are stock dependent or independent. Second, we study the impacts that alternate biological growth functions and the dependence of welfare in the buying country on the resource stock have on the optimal tariffs. Third, we note that because the simultaneous use of both tariffs does not render one tariff extraneous, it makes sense for the buyer to use both tariffs concurrently. Finally, we show that when the buyer uses both tariffs simultaneously, she can force the monopolistic seller to behave competitively.

Keywords: Conservation, International Trade, Renewable Resource, Stackelberg Game, Tariff

JEL Classification: F12, F18, Q20

Suggested Citation

Batabyal, Amitrajeet A. and Beladi, Hamid, A Differential Game Theoretic Analysis of International Trade in Renewable Resources (January 2007). Available at SSRN: https://ssrn.com/abstract=959648 or http://dx.doi.org/10.2139/ssrn.959648

Amitrajeet A. Batabyal (Contact Author)

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

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Hamid Beladi

University of Texas at San Antonio - College of Business - Department of Economics ( email )

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