Time Consistent Export Quotas in an Oligopolistic World Market
AbstractWe investigate the strategic behavior between exporting countries that face endogenous terms of trade on the world market. In a non-cooperative setting, if production decisions occur before consumption decisions, the ex-ante optimal export quota is not time consistent as the ex-post elasticity of the residual foreign import demand curve is lower than the ex-ante elasticity. However, we show that the exporters? inability to irrevocably commit to their quota may be welfare superior to the precommitment solution. If exporters can sell forward a proportion of their exports before production decisions are made, they will do so even though, in equilibrium, it may decrease welfare compared to a situation in which forward markets do not exist. Moreover, the equilibrium with forward markets is welfare inferior to the commitment equilibrium for exporters.
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Bibliographic InfoPaper provided by Iowa State University, Department of Economics in its series Staff General Research Papers with number 5186.
Date of creation: 01 Mar 2002
Date of revision:
Publication status: Published in Journal of International Economics, March 2002, vol. 56 no. 2, pp. 445-463
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Postal: Iowa State University, Dept. of Economics, 260 Heady Hall, Ames, IA 50011-1070
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Other versions of this item:
- Gervais, Jean-Philippe & Lapan, Harvey E., 2002. "Time consistent export quotas in an oligopolistic world market," Journal of International Economics, Elsevier, vol. 56(2), pages 445-463, March.
- NEP-ALL-2002-09-28 (All new papers)
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