Production uncertainty and trade policy commitment
AbstractAgricultural markets are characterized by production and marketing lags. Uncertainty is also an inherent feature of agricultural markets. This paper investigates if two policy active importers will choose to commit to their import levels or keep the flexibility to revise their ex-ante import levels once production decisions are made and the uncertainty is resolved. This is the constant dilemma faced by prospective WTO members. We assume production in both importing countries is subject to an asymmetric random shock. We show that a government will not want to commit to its import level when there is a high degree of uncertainty in production. However, an importing country is likely to commit to a trade policy in equilibrium although the equilibrium may be Pareto dominated. Under certain conditions, an equilibrium in which one country commits to its ex-ante import level while the other chooses the flexibility option can emerge. In this setting, international trade agreements play an important role.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Bibliographic InfoArticle provided by Taylor & Francis Journals in its journal The Journal of International Trade & Economic Development.
Volume (Year): 10 (2001)
Issue (Month): 1 ()
Contact details of provider:
Web page: http://www.tandfonline.com/RJTE20
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Constantinos Syropoulos, 1994. "Endogenous Timing in Games of Commercial Policy," Canadian Journal of Economics, Canadian Economics Association, vol. 27(4), pages 847-64, November.
- Fishelson, Gideon & Flatters, Frank, 1975. "The (non)equivalence of optimal tariffs and quotas under uncertainty," Journal of International Economics, Elsevier, vol. 5(4), pages 385-393, November.
- Rodriguez, Carlos Alfredo, 1974. "The non-equivalence of tariffs and quotas under retaliation," Journal of International Economics, Elsevier, vol. 4(3), pages 295-298, August.
- L. Wade, 1988. "Review," Public Choice, Springer, vol. 58(1), pages 99-100, July.
- Staiger, Robert W., 1995.
"International rules and institutions for trade policy,"
Handbook of International Economics,
in: G. M. Grossman & K. Rogoff (ed.), Handbook of International Economics, edition 1, volume 3, chapter 29, pages 1495-1551
- Robert W. Staiger, 1994. "International Rules and Institutions for Trade Policy," NBER Working Papers 4962, National Bureau of Economic Research, Inc.
- Hamilton, J.H. & Slutsky, S.M., 1988.
"Endogenous Timing In Duopoly Games: Stackelberg Or Cournot Equilibria,"
88-4, Florida - College of Business Administration.
- Hamilton, Jonathan H. & Slutsky, Steven M., 1990. "Endogenous timing in duopoly games: Stackelberg or cournot equilibria," Games and Economic Behavior, Elsevier, vol. 2(1), pages 29-46, March.
- Lapan, Harvey E., 1988.
"The Optimal Tariff, Production Lags and Time Consistency,"
Staff General Research Papers
10816, Iowa State University, Department of Economics.
- Lapan, Harvey E, 1988. "The Optimal Tariff, Production Lags, and Time Consistency," American Economic Review, American Economic Association, vol. 78(3), pages 395-401, June.
- Larry Karp & David M. Newbery, 1992. "Dynamically Consistent Oil Import Tariffs," Canadian Journal of Economics, Canadian Economics Association, vol. 25(1), pages 1-21, February.
- Dasgupta, Partha & Stiglitz, Joseph E, 1977. "Tariffs vs . Quotas as Revenue Raising Devices under Uncertainty," American Economic Review, American Economic Association, vol. 67(5), pages 975-81, December.
- Bergstrom, Theodore C, 1982. "On Capturing Oil Rents with a National Excise Tax," American Economic Review, American Economic Association, vol. 72(1), pages 194-201, March.
- Pelcovits, Michael D., 1976. "Quotas versus tariffs," Journal of International Economics, Elsevier, vol. 6(4), pages 363-370, November.
- Young, Leslie & Anderson, James E, 1982. "Risk Aversion and Optimal Trade Restrictions," Review of Economic Studies, Wiley Blackwell, vol. 49(2), pages 291-305, April.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Michael McNulty).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.