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Optimal Tariffs on Exhaustible Resources: The Case of Quantity Setting

Author

Listed:
  • Kenji Fujiwara

    (School of Economics, Kwansei Gakuin University)

  • Ngo Van Long

    (Department of Economics, McGill University)

Abstract

Constructing a dynamic game model of trade of an exhaustible resource, this paper compares feedback Nash and Stackelberg equilibria. We consider two di erent 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 o if the importing country is a leader, but that the follower becomes worse o 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.

Suggested Citation

  • Kenji Fujiwara & Ngo Van Long, 2012. "Optimal Tariffs on Exhaustible Resources: The Case of Quantity Setting," Discussion Paper Series 82, School of Economics, Kwansei Gakuin University, revised Feb 2012.
    • Handle: RePEc:kgu:wpaper:82
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    References listed on IDEAS

    as
    1. 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.
    2. Larry Karp & Jiangfeng Zhang, 2016. "Taxes Versus Quantities for a Stock Pollutant with Endogenous Abatement Costs and Asymmetric Information," Studies in Economic Theory, in: Graciela Chichilnisky & Armon Rezai (ed.), The Economics of the Global Environment, pages 493-533, Springer.
    3. James L. Smith, 2009. "World Oil: Market or Mayhem?," Journal of Economic Perspectives, American Economic Association, vol. 23(3), pages 145-164, Summer.
    4. Kenji Fujiwara & Ngo Long, 2011. "Welfare Implications of Leadership in a Resource Market under Bilateral Monopoly," Dynamic Games and Applications, Springer, vol. 1(4), pages 479-497, December.
    5. Ngo Long & Gerhard Sorger, 2010. "A dynamic principal-agent problem as a feedback Stackelberg differential game," Central European Journal of Operations Research, Springer;Slovak Society for Operations Research;Hungarian Operational Research Society;Czech Society for Operations Research;Österr. Gesellschaft für Operations Research (ÖGOR);Slovenian Society Informatika - Section for Operational Research;Croatian Operational Research Society, vol. 18(4), pages 491-509, December.
    6. Ngo Long & Gerhard Sorger, 2010. "A dynamic principal-agent problem as a feedback Stackelberg differential game," Central European Journal of Operations Research, Springer;Slovak Society for Operations Research;Hungarian Operational Research Society;Czech Society for Operations Research;Österr. Gesellschaft für Operations Research (ÖGOR);Slovenian Society Informatika - Section for Operational Research;Croatian Operational Research Society, vol. 18(4), pages 491-509, December.
    7. Robert M. Solow, 1974. "The Economics of Resources or the Resources of Economics," Palgrave Macmillan Books, in: Chennat Gopalakrishnan (ed.), Classic Papers in Natural Resource Economics, chapter 12, pages 257-276, Palgrave Macmillan.
    8. Mr. Jon Strand, 2008. "Importer and Producer Petroleum Taxation: A Geo-Political Model," IMF Working Papers 2008/035, International Monetary Fund.
    9. Karp, Larry, 2008. "Taxes versus quantities for a shock pollutant with endogenous abatament costs and asymmetric information," CUDARE Working Paper Series 1064, University of California at Berkeley, Department of Agricultural and Resource Economics and Policy.
    10. Tahvonen, Olli, 1996. "Trade with Polluting Nonrenewable Resources," Journal of Environmental Economics and Management, Elsevier, vol. 30(1), pages 1-17, January.
    11. 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.
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    Cited by:

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    3. Benchekroun, H. & Benchekroun, S., 2015. "Harvests' lifespan and North–South market share rivalry," International Review of Economics & Finance, Elsevier, vol. 37(C), pages 114-124.

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    More about this item

    Keywords

    dynamic game; feedback Nash equilibrium; feedback Stackelberg equilibrium;
    All these keywords.

    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

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