A Stackelberg game model of trade in renewable resources with competitive sellers

We model international trade in renewable resources between a single buyer and competitive sellersas a Stackelberg differential game. The buyer uses unit and ad valorem tariffs to indirectly encourageconservation of the renewable resource under study. First, we show that the efficacy of these trade policyinstruments in promoting conservation depends fundamentally on whether harvesting costs are stockdependent or independent. When harvesting costs are stock independent, the optimal open loop tariffs aredynamically consistent. In contrast, when harvesting costs are stock dependent, the optimal open looptariffs are dynamically inconsistent. Second, we point out that whether the terminal value of the resourcestock is higher with the stock independent or the stock dependent cost function cannot be resolvedunambiguously. Third, we show that it does not make sense for the buyer to use both tariffs simultaneously.Finally, we discuss the implications of these and other findings for renewable resource conservation ingeneral.