OPEC and the U.S. Oil Import Tariff

Larry Karp and David M Newbery

Economic Journal, 1991, vol. 101, issue 405, 303-13

Abstract: Open-loop Nash extraction plans of exhaustible resource producers (in which producers take the plans of others as given) are time consistent, but proposed open-loop oil import tariffs are almost always time inconsistent. The paper derives a time consistent open-loop Nash tariff that can be readily computed for both competitive and a Nash-Cournot specification of the oil market. The authors illustrate the time sequence of the optimal import tariff for a simple model of the United States facing a duopolistic version of OPEC and a comparative fringe of oil producers, and compare the outcome with the competitive equilibrium. Copyright 1991 by Royal Economic Society.

Date: 1991
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