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Optimal Tariffs on Exhaustible Resources : The Case of Quantity Setting

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  • Kenji Fujiwara
  • Ngo Van Long

    ()

Abstract

Constructing a dynamic game model of trade of an exhaustible resource, this paper compares feedback Nash and Stackelberg equilibria when the exporting country sets quantity rather than price. We consider two different leadership scenarios: leadership by the importing country, and leadership by the exporting country. We numerically show that as compared to the Nash equilibrium, both countries are better off if the importing country is a leader, but that the follower is worse off if the exporting country is a leader. Consequently, the world welfare is highest under the importing country's leadership and lowest under the exporting country's leadership. On construit un modèle d’un jeu dynamique d’échange en ressource non-renouvelable sous l’hypothèse que le pays exportateur détermine la quantité au lieu du prix. L’objectif est de comparer l’équilibre de Nash avec les équilibres de Stackelberg. Dans un premier temps, c’est le pays importateur qui est le leader. Dans un deuxième temps, le pays exportateur assume le leadership. On démontre numériquement que, par rapport à l’équilibre de Nash , le niveau de bien-être des deux pays est plus élevé sous l’équilibre de Stackelberg dans le cas où l’importateur est le leader. Dans le cas où le pays exportateur est le leader, le niveau de bien-être du pays importateur est moins élevé que celui de l’équilibre de Nash. Le bien-être du monde entier dans le cas du leadership du pays importateur est plus élevé que dans le cas opposé.

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Bibliographic Info

Paper provided by CIRANO in its series CIRANO Working Papers with number 2012s-02.

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Date of creation: 01 Jan 2012
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Handle: RePEc:cir:cirwor:2012s-02

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Keywords: dynamic game; exhaustible resource; Stackelberg leadership.; jeu dynamique; ressources non-renouvelables; leadership de Stackelberg.;

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References

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  1. James L. Smith, 2008. "World Oil: Market or Mayhem?," Working Papers 0815, Massachusetts Institute of Technology, Center for Energy and Environmental Policy Research.
  2. Ngo Van Long & Gerhard Sorger, 2009. "A dynamic pricipal-agent problem as a feedback Stackelberg differentioal game," Vienna Economics Papers 0905, University of Vienna, Department of Economics.
  3. Rubio, Santiago J. & Escriche, Luisa, 2001. "Strategic pigouvian taxation, stock externalities and polluting non-renewable resources," Journal of Public Economics, Elsevier, vol. 79(2), pages 297-313, February.
  4. Kenji Fujiwara & Ngo Van Long, 2010. "Welfare Implications of Leadership in a Resource Market Under Bilateral Monopoly," CIRANO Working Papers 2010s-16, CIRANO.
  5. Van Long Ngo, 2010. "A Survey Of Dynamic Games In Economics:," World Scientific Books, World Scientific Publishing Co. Pte. Ltd., volume 1, number 7577.
  6. Dockner,Engelbert J. & Jorgensen,Steffen & Long,Ngo Van & Sorger,Gerhard, 2000. "Differential Games in Economics and Management Science," Cambridge Books, Cambridge University Press, number 9780521637329, November.
  7. Wirl Franz, 1994. "Pigouvian Taxation of Energy for Flow and Stock Externalities and Strategic, Noncompetitive Energy Pricing," Journal of Environmental Economics and Management, Elsevier, vol. 26(1), pages 1-18, January.
  8. Tahvonen, Olli, 1996. "Trade with Polluting Nonrenewable Resources," Journal of Environmental Economics and Management, Elsevier, vol. 30(1), pages 1-17, January.
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