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http://dx.doi.org/10.15266/KEREA.2016.25.2.255

The Impact of Oil Exploration and Development on the Dynamic Structure of Tariff Imposed by Oil Importing Country: The Case of OPEC  

Lee, Dug Man (School of Business Administration and Economics, Konkuk University)
Publication Information
Environmental and Resource Economics Review / v.25, no.2, 2016 , pp. 255-276 More about this Journal
Abstract
This paper is designed to investigate the dynamic structure of optimal tariff imposed by the oil importing country from OPEC when OPEC increases the oil reserves through exploration and development. For this purpose, we used a Stckelberg differential game modeling approach, and tried to analyze two cases such that the one is the extraction cost is dependent on the oil reserves and the other is the extraction cost is independent of it. On the basis of this analysis, we propose that the importing contry has to impose dynamically inconsistent tariffs if the extraction cost is dependent on the oil reserves. Otherwise, she should impose dynamically consistent tariffs announced at initial time. In addition, we found that whether or not the exporting country uses some portion of oil produced for domestic consumption does not affect our policy proposition stated above.
Keywords
Exploration and Development; Oil Importing Tariff; Dynamically Inconsistent; Oil Reserves;
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