OPEC AND THE UNITED-STATES OIL IMPORT TARIFF

We have derived a time consistent import tariff for exhaustible resources which is the natural counterpart to the time consistent open-loop Nash-Cournot supply strategy for a set of exhaustible resource producers. The tariff is easy to characterise and compute, is a function of currently observed variables alone, and will continue to apply to cases where both producers and importers exercise market power. We have shown how to derive an equilibrium for the world oil market in which OPEC behaves no more collusively than a duopoly facing a competitive fringe, and in which the United States and other large importers all impose optimal import tariffs. The resulting equilibrium begins with a lower rate of extraction than the competitive equilibrium. The import tariffs tend to lower the initial price, but the producers' oligopolistic behaviour tends to increase it. The model suggests that oligopsony power is more effective than oligopoly power, at least for this specification of demand, and the given parameters. -from Authors