Optimal Tariffs on Exhaustible Resources: The Case of Quantity Setting

24 Pages Posted: 5 Feb 2012

See all articles by Kenji Fujiwara

Kenji Fujiwara

Kwansai Gakuin University

Ngo Van Long

McGill University - Department of Economics; CESifo (Center for Economic Studies and Ifo Institute)

Date Written: February 3, 2012

Abstract

Constructing a dynamic game model of trade of an exhaustible resource, this paper compares feedback Nash and Stackelberg equilibria when the exporting country sets quantity rather than price. 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.

Keywords: dynamic game, exhaustible resource, Stackelberg leadership

JEL Classification: C73, L72, Q34, F18

Suggested Citation

Fujiwara, Kenji and Van Long, Ngo, Optimal Tariffs on Exhaustible Resources: The Case of Quantity Setting (February 3, 2012). CIRANO - Scientific Publications 2012s-02, Available at SSRN: https://ssrn.com/abstract=1999043

Kenji Fujiwara

Kwansai Gakuin University ( email )

Japan

Ngo Van Long (Contact Author)

McGill University - Department of Economics ( email )

855 Sherbrooke Street West
Montreal, QC H3A 2T7
Canada
514-398-4850 (Phone)
514-398-4938 (Fax)

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

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