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Time-Consistent Oil Import Tariffs

Author

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  • Karp, Larry
  • Newbery, David M G

Abstract

Open-loop Nash extraction plans of exhaustible resource producers (in which producers take the plans of others as given) are time-consistent, but the normal specification of the open-loop import plans of countries with market power (in which countries take the import tariffs of other importers as given) are normally time-inconsistent. The paper shows why, and derives time-consistent, open-loop Nash tariffs in a natural formulation of the problem. The two tariffs can be readily computed and compared, and differ except for a special class of import demands. The time paths of tariffs and the welfare cost of an inability to commit are calculated for a dominant importer. The welfare costs are small if its market share is below one half.

Suggested Citation

  • Karp, Larry & Newbery, David M G, 1989. "Time-Consistent Oil Import Tariffs," CEPR Discussion Papers 344, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:344
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    Cited by:

    1. Lorenczik, Stefan & Malischek, Raimund & Trüby, Johannes, 2017. "Modeling strategic investment decisions in spatial markets," European Journal of Operational Research, Elsevier, vol. 256(2), pages 605-618.

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