Optimal Tariffs on Exhaustible Resources: The Case of a Quantity Setting Cartel
AbstractWe 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.
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Bibliographic InfoPaper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 3721.
Date of creation: 2012
Date of revision:
dynamic game; exhaustible resource; Stackelberg leadership; optimal tariff;
Find related papers by JEL classification:
- C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
- L72 - Industrial Organization - - Industry Studies: Primary Products and Construction - - - Mining, Extraction, and Refining: Other Nonrenewable Resources
- Q34 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Natural Resources and Domestic and International Conflicts
- F18 - International Economics - - Trade - - - Trade and Environment
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