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- All Subjects: Dairy products industry--Economic aspects
- Creators: Schmitz, Andrew
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 three 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; (2) the producer marketing board acts as a Stackelberg leader, taking into account the importers’ reaction to its production quota level; and (3) the importer behaves as a Stackelberg leader, taking into account producers’ reaction to its import 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.