We consider a common-pool renewable resource differential game. We show that within this dynamic oligopolistic framework, free trade may lead to a lower discounted sum of consumer surplus and of social welfare than autarky. Trade restrictions may be supported based on both resource conservation and efficiency motives. A priori, this fi…nding is not straightforward; a move from Autarky to Free Trade causes industry output to fi…rst increase and then decrease over time. While producers are shown to be always worse off under free trade than under autarky, consumers are better off in the short run and worse o¤ in the long run. We determine the conditions under which the long-run effects outweigh the short-run effects of trade, leading to a decrease in the discounted sum of not only consumer surplus, but also social welfare.
|Name||CentER Discussion Paper|
- renewable resources
- international trade
- common property