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Time Consistent Export Quotas in an Oligopolistic World Market

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  • Gervais, Jean-Philippe
  • Lapan, Harvey E.

Abstract

We 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.

Suggested Citation

  • Gervais, Jean-Philippe & Lapan, Harvey E., 2002. "Time Consistent Export Quotas in an Oligopolistic World Market," Staff General Research Papers Archive 5186, Iowa State University, Department of Economics.
  • Handle: RePEc:isu:genres:5186
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    Cited by:

    1. Jean-Philippe Gervais & Bruno Larue & Harvey E. Lapan, 2008. "WTO Disciplines on Domestic Support and Market Access in Agri-Food Supply Chains," Canadian Journal of Agricultural Economics/Revue canadienne d'agroeconomie, Canadian Agricultural Economics Society/Societe canadienne d'agroeconomie, vol. 56(4), pages 429-444, December.

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