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Food Supply Management and Tariffication: A Game Theoretic Approach

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  • Schmitz Troy G.

    (Morrison School of Agribusiness and Resource Management, Arizona State University, Tempe, Arizona, USA)

  • Schmitz Andrew

    (Food and Resource Economics Department, Institute of Food and Agricultural Sciences University of Florida, Gainesville, Florida, USA)

Abstract

We compare the current Canadian supply management regime in which producers and importers benefit from rent-seeking activities that set production quota and import quota levels with those under a tariff, in which producers partakes in rent-seeking activities in order to induce the government to introduce a favorable tariff regime. We explore two different quota-setting games: (1) the import quota and production quota are set at a level that arises from a Cournot-Nash equilibrium between producers and importers; and (2) the producer marketing board acts as a Stackelberg leader, taking into account the importers' reaction to its production quota level. We compare these quota-setting games with two different tariff-setting games: (1) A non-cooperative game in which the government sets the tariff at a level that maximizes tariff revenue; and (2) A cooperative game in which producers, through rent-seeking activities, induce the government to set the tariff at a level that maximizes joint government and producer rents.

Suggested Citation

  • Schmitz Troy G. & Schmitz Andrew, 2002. "Food Supply Management and Tariffication: A Game Theoretic Approach," Journal of Agricultural & Food Industrial Organization, De Gruyter, vol. 1(1), pages 1-21, October.
    • Handle: RePEc:bpj:bjafio:v:1:y:2002:i:1:n:4
    DOI: 10.2202/1542-0485.1006
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    References listed on IDEAS

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    1. Andrew Schmitz & Troy G. Schmitz, 1994. "Supply Management: The Past and Future," Canadian Journal of Agricultural Economics/Revue canadienne d'agroeconomie, Canadian Agricultural Economics Society/Societe canadienne d'agroeconomie, vol. 42(2), pages 125-148, July.
    2. Schmitz, Troy G., 2002. "Measuring Inefficiency in the Presence of an Export Tax, an Import Tariff, and a State Trading Enterprise," Journal of Agricultural and Applied Economics, Cambridge University Press, vol. 34(1), pages 81-93, April.
    3. Giancarlo Moschini & Karl D. Meilke, 1991. "Tariffication with Supply Management: The Case of the U.S.-Canada Chicken Trade," Canadian Journal of Agricultural Economics/Revue canadienne d'agroeconomie, Canadian Agricultural Economics Society/Societe canadienne d'agroeconomie, vol. 39(1), pages 55-68, March.
    4. Andrew Schmitz, 1983. "Supply Management in Canadian Agriculture: An Assessment of the Economic Effects," Canadian Journal of Agricultural Economics/Revue canadienne d'agroeconomie, Canadian Agricultural Economics Society/Societe canadienne d'agroeconomie, vol. 31(2), pages 135-152, July.
    5. Richard Harris, 1985. "Why Voluntary Export Restraints Are 'Voluntary.'," Canadian Journal of Economics, Canadian Economics Association, vol. 18(4), pages 799-809, November.
    6. Chambers,Robert G., 1988. "Applied Production Analysis," Cambridge Books, Cambridge University Press, number 9780521314275, October.
    7. James Vercammen & Andrew Schmitz, 1992. "Supply Management and Import Concessions," Canadian Journal of Economics, Canadian Economics Association, vol. 25(4), pages 957-971, November.
    8. Rachel McCulloch, 1973. "When Are a Tariff and a Quota Equivalent:," Canadian Journal of Economics, Canadian Economics Association, vol. 6(4), pages 503-511, November.
    9. Schmitz, Troy G., 2002. "Measuring Inefficiency In The Presence Of An Export Tax, An Import Tariff, And A State Trading Enterprise," Journal of Agricultural and Applied Economics, Southern Agricultural Economics Association, vol. 34(1), pages 1-13, April.
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