DP344 Time-Consistent Oil Import Tariffs
|Author(s):||Larry Karp, David M G Newbery|
|Publication Date:||November 1989|
|Keyword(s):||Exhaustible Resources, Imports, Natural Resources, Tariffs|
|JEL(s):||411, 422, 721|
|Programme Areas:||International Trade and Regional Economics|
|Link to this Page:||cepr.org/active/publications/discussion_papers/dp.php?dpno=344|
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.