Tariff Agreements And Non-Renewable Resource International Monopolies: Prices Versus Quantitites
AbstractIn this paper we model the case of an international non-renewable resource monopolist as a differential game between the monopolist and the governments of the importing countries, and we investigate whether a tariff on the resource importations can be advantageous for the importing countries. We find that the results depend crucially on the kind of strategies the importing country governments can play and on whether the monopolist chooses the price or the 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 an open-loop tariff is advantageous for the importing countries. 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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Bibliographic InfoPaper provided by Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie) in its series Working Papers. Serie AD with number 2005-10.
Length: 26 pages
Date of creation: Mar 2005
Date of revision:
Publication status: Published by Ivie
tariffs; tariff agreements; non-renewable resources; depletion effects; price-setting monopolist; quantity-setting monopolist; differential games; open-loop strategies; linear strategies; Markov-perfect Nash equilibrium; Markov-perfect Stackelberg equilibrium;
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)
This paper has been announced in the following NEP Reports:
- NEP-ALL-2006-02-05 (All new papers)
- NEP-INT-2006-02-05 (International Trade)
- NEP-MIC-2006-02-05 (Microeconomics)
- NEP-PBE-2006-02-05 (Public Economics)
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