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Optimal Tariffs On Exhaustible Resources: The Case Of Quantity-Setting

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  • KENJI FUJIWARA

    (School of Economics, Kwansei Gakuin University, Uegahara 1-1-155, Nishinomiya, Hyogo, 662-8502, Japan)

  • NGO VAN LONG

    (Department of Economics, McGill University, 855 Sherbrooke Street West, Montreal, Quebec, H3A 2T7, Canada)

Abstract

Constructing a dynamic game model of trade of an exhaustible resource, this paper compares feedback Nash and Stackelberg equilibria. 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.

Suggested Citation

  • Kenji Fujiwara & Ngo Van Long, 2012. "Optimal Tariffs On Exhaustible Resources: The Case Of Quantity-Setting," International Game Theory Review (IGTR), World Scientific Publishing Co. Pte. Ltd., vol. 14(04), pages 1-17.
    • Handle: RePEc:wsi:igtrxx:v:14:y:2012:i:04:n:s021919891240004x
    DOI: 10.1142/S021919891240004X
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    References listed on IDEAS

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    1. 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.
    2. 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.
    3. 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.
    4. 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.
    5. 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.
    6. Mr. Jon Strand, 2008. "Importer and Producer Petroleum Taxation: A Geo-Political Model," IMF Working Papers 2008/035, International Monetary Fund.
    7. 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.
    8. James L. Smith, 2009. "World Oil: Market or Mayhem?," Journal of Economic Perspectives, American Economic Association, vol. 23(3), pages 145-164, Summer.
    9. Tahvonen, Olli, 1996. "Trade with Polluting Nonrenewable Resources," Journal of Environmental Economics and Management, Elsevier, vol. 30(1), pages 1-17, January.
    10. 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.
    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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    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; C73; L72;
    All these keywords.

    JEL classification:

    • B4 - Schools of Economic Thought and Methodology - - Economic Methodology
    • C0 - Mathematical and Quantitative Methods - - General
    • C6 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling
    • C7 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory
    • D5 - Microeconomics - - General Equilibrium and Disequilibrium
    • D7 - Microeconomics - - Analysis of Collective Decision-Making
    • M2 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Economics

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