Ngo Van Long

Protectionist responses and declining industries

Abstract This paper employs a three-factor Ricardo-Viner model of a small economy to analyse the effect of a falling world import price on the domestic price of the economys importable good in the presence of an endogenously determined tariff. The outcome is seen to depend on (a) the way in which the recycled tariff revenue is allocated to the three factor groups, and (b) differences in relative risk aversion across those groups. However, under reasonable assumptions, Hillmans (1982) result that ‘a declining industry will continue to decline’ is seen to hold in our general equilibrium framework.

Optimal control theory and static optimization in economics: Frontmatter

Optimal control theory is a technique being used increasingly by academic economists to study problems involving optimal decisions in a multi-period framework. This textbook is designed to make the difficult subject of optimal control theory easily accessible to economists while at the same time maintaining rigour. Economic intuitions are emphasized, and examples and problem sets covering a wide range of applications in economics are provided to assist in the learning process. Theorems are clearly stated and their proofs are carefully explained. The development of the text is gradual and fully integrated, beginning with simple formulations and progressing to advanced topics such as control parameters, jumps in state variables, and bounded state space. For greater economy and elegance, optimal control theory is introduced directly, without recourse to the calculus of variations. The connection with the latter and with dynamic programming is explained in a separate chapter. A second purpose of the book is to draw the parallel between optimal control theory and static optimization. Chapter 1 provides an extensive treatment of constrained and unconstrained maximization, with emphasis on economic insight and applications. Starting from basic concepts, it derives and explains important results, including the envelope theorem and the method of comparative statics. This chapter may be used for a course in static optimization. The book is largely self-contained. No previous knowledge of differential equations is required.

Optimal Control Theory and Static Optimization in Economics by Daniel Léonard

Optimal control theory is a technique being used increasingly by academic economists to study problems involving optimal decisions in a multi-period framework. This textbook is designed to make the difficult subject of optimal control theory easily accessible to economists while at the same time maintaining rigour. Economic intuitions are emphasized, and examples and problem sets covering a wide range of applications in economics are provided to assist in the learning process. Theorems are clearly stated and their proofs are carefully explained. The development of the text is gradual and fully integrated, beginning with simple formulations and progressing to advanced topics such as control parameters, jumps in state variables, and bounded state space. For greater economy and elegance, optimal control theory is introduced directly, without recourse to the calculus of variations. The connection with the latter and with dynamic programming is explained in a separate chapter. A second purpose of the book is to draw the parallel between optimal control theory and static optimization. Chapter 1 provides an extensive treatment of constrained and unconstrained maximization, with emphasis on economic insight and applications. Starting from basic concepts, it derives and explains important results, including the envelope theorem and the method of comparative statics. This chapter may be used for a course in static optimization. The book is largely self-contained. No previous knowledge of differential equations is required.

A SURVEY OF DYNAMIC GAMES IN ECONOMICS

This book provides readers with a comprehensive survey of models of dynamic games in economics, including an extensive coverage of numerous fields of applications. It will also discuss and explain main concepts and techniques used in dynamic games, and inform readers of its major developments while equipping them with tools and ideas that will aid in the formulation of solutions for problems. A Survey of Dynamic Games in Economics will interest those who wish to study more about the conceptions, approaches and models that are applied in the domain of dynamic games.

On Two Folk Theorems Concerning the Extraction of Exhaustible Resources

Consider a closed economy with several deposits of an exhaustible resource, with the marginal cost of extraction differing from deposit to deposit but constant for each deposit. It is widely believed that social optimality requires that deposits be exploited in strict sequence, beginning with the lowest cost deposit. It is shown that, in a general equilibrium context, with Ricardian techniques of extraction, the validity of the proposition depends on what is meant by constancy of cost. It is also believed that if there exists a high-cost substitute for the resource then the resource should be exhausted before production of the substitute is begun. It is shown that this proposition is false.

Risk-Averse Rent Seeking with Shared Rents

This paper presents a Nash equilibrium model of rent-seeking behavior in which risk-averse players expend resources to obtain a share of a rent, as for example in contests for import quota licences. Results are obtained relating the equilibrium level of lobbying effort by each player to the value of the rent. In particular, reduced individual lobbying effort is associated with higher rents contested if players are sufficiently risk averse. The question of whether the value of rents is a good measure of the resource cost of rent seeking is also considered. A simple approximation involving risk and risk-aversion parameters is derived for the proportion of rents dissipated in long-run equilibrium. Risk and risk aversion are seen to reduce the rent-dissipation ratio below unity. Copyright 1987 by Royal Economic Society.

International trade with endogenous enforcement of property rights

We model the endogenous evolution of the de facto property rights regime and explore the impact of trade on de facto property rights regimes and on welfare. The model takes into account the dynamics of the stocks of natural resources, and the effect of trade on resource utilization. We show that the opening of trade can change the de facto property rights regime of an economy. Such changes may lead to a greater stock of resource, but are not always beneficial to society due to the enforcement costs. Thus, the opening of trade can be harmful.

Cost heterogeneity, industry concentration and strategic trade policies

Abstract We show that if domestic firms do not have identical unit costs, then the interplay between the Herfindahl index of concentration and the elasticity of the slope of the demand curve is of major importance in the determination of optimal trade policies. In some cases, the direction of optimal policy is reversed.

Pollution control: a differential game approach

Transnational pollution is formulated as a differential game between two sovereign governments. The symmetric open loop Nash equilibrium is shown to yield more pollution than in a cooperative solution. A model of Stackelberg leadership in pollution control is also investigated. The possibility of limit cycles is illustrated, using bifurcation theory.

Dynamic Games in the Economics of Natural Resources: A Survey

This article provides a comprehensive survey of models of dynamic games in the exploitation of renewable and exhaustible resources. It includes dynamic games at the industry level (oligopoly, cartel versus fringe, tragedy of the commons) and at the international level (tariffs on exhaustible resources, fish wars, entry deterrence). Among more recent topics are international strategic issues involving the link between resource uses and transboundary pollution, the design of taxation to ensure efficient outcomes under symmetric and asymmetric information, the rivalry among factions in countries where property rights on natural resources are not well established. Various extensions are considered, such as (i) modeling the effects of the concern for relative performance (relative income, relative consumption, and social status) on the over-exploitation of resources, (ii) applying the tragedy of the commons paradigm to the declining effectiveness of antibiotics and pesticides. Outcomes under Nash equilibria and Stackelberg equilibria are compared. The paper ends with some suggestions for future research.