A Dynamic Bertrand Game Model of Trade, Threats, and Export Certification in Alien Species Management

Journal of Economic Research, Vol. 12, pp. 65-78, 2007

Posted: 25 Jun 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

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Abstract

We analyze a dynamic Bertrand game model of trade between Foreign and Home in which the Foreign firm's export good is shipped to Home in containers carried by ships. This shipment to Home may also result in the unwitting introduction of alien species from Foreign into Home. By undertaking prophylactic measures in Foreign, the Foreign firm can certify that the container cargo it is sending to Home contains no alien species. However, because certification is costly, ceteris paribus, the Foreign firm has little or no incentive to certify its exports. Therefore, we investigate whether it is possible for a regulatory authority in Home to threaten to levy a duty on the Foreign firm's exports and thereby get this firm to certify its exports. Our analysis shows that when the elasticities of import and domestic demand and the profit function of the Foreign firm satisfy certain restrictions, it is indeed possible for the Home regulatory authority to obtain export certification with the threat of a duty on the Foreign firm's exports.

Keywords: Alien Species, Bertrand Game, Duty, Export Certification, International Trade

JEL Classification: F130, F180, Q560

Suggested Citation

Batabyal, Amitrajeet A. and Beladi, Hamid, A Dynamic Bertrand Game Model of Trade, Threats, and Export Certification in Alien Species Management. Journal of Economic Research, Vol. 12, pp. 65-78, 2007, Available at SSRN: https://ssrn.com/abstract=995817

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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