Food supply management and tariffication: A game theoretic approach

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.