Social Welfare Impacts of Imposing an Import Tariff on Maize Market in Iran Compared to an Export Tax in China and Brazil Using: a Game Theory Approach

Abstract

The social welfare impacts of Iran’s maize import policies versus China and Brazil export policies using a game theoretic approach. The economy of maize export by China and Brazil as well as Iran’s import demand are analyzed using empirical imports models. In this study, supply, demand, imports and price equations are estimated using a three-stage least squares (3SLS) model to obtain elasticities. The estimated elasticities are incorporated in a non-cooperative dynamic game framework to analyze the possible impacts of policy changes in these three countries. This study analyzes various policies, including several scenarios regarding changes in Iran’s import tariff from 0% to 10% with respect to China and Brazil exported price ratio (export tax on domestic price of Iran) from 0.56-1.36. The results indicate that Iranian government should impose a tariff rate approximately 8% to maximize its own social welfare considering export taxes of 0.98 and 0.93 imposed by China and Brazil respectively. The results also suggest that policy makers in Iran should focus more on Iran’s tariff rates rather than export taxes imposed by China and Brazil.