In this paper the scope of Bergstrom’s (1982) results is studied. Moreover, his analysis is extended assuming that extraction cost is directly related to accumulated extractions. For the case of a competitive market it is found that the optimal policy is a constant tariff if extraction is costless. However, with depletion effects, the optimal tariff must ultimately be decreasing. For the case of a monopolistic market the results depend crucially on the kind of strategies the importing country governments can play and on whether the monopolist chooses the price or extraction rate. For a price-setting monopolist it is shown that the importing countries cannot use a tariff to capture monopoly rents if they are constrained to use open-loop strategies, even if the governments sign a tariff agreement. This result is drastically modified if the importing countries in the tariff agreement use Markov (feedback) strategies. For a quantity-setting monopolist the nature of the game changes and the importing country governments find it advantageous to set a tariff on resource importations. Moreover, in this case the importing countries in a tariff agreement enjoy a strategic advantage which allows them to behave as a leader.
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Paper provided by Fondazione Eni Enrico Mattei in its series Working Papers with number
2004.133.
Find related papers by JEL classification: C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games D41 - Microeconomics - - Market Structure and Pricing - - - Perfect Competition D42 - Microeconomics - - Market Structure and Pricing - - - Monopoly F02 - International Economics - - General - - - International Economic Order; Noneconomic International Organizations;; Economic Integration and Globalization: General H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General Q38 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Government Policy (includes OPEC Policy)
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