Strategic Trade Policy with Competitive Storage

David Vanzetti () and John Kennedy

European Review of Agricultural Economics, 1990, vol. 17, issue 4, 465-83

Abstract: Where international commodity markets are characterized by the use of market power and lags in production or policy responses, dynamic games provide a useful means of analyzing the conflict. A deterministic, dynamic game model with storage is developed in which each country sets a trade tax and carries stocks so as to maximize a quadratic objective function subject to linear intertemporal constraints. An iterative optimal control procedure is used to account for the independence between each countries' policies. The analysis is applied to a four-sector world wheat model. The results illustrate the role of stocks as a strategic variable in a deterministic environment. Copyright 1990 by Oxford University Press.

Date: 1990
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