蝌蚪网 Review
ISSN 0002-8282 (Print) | ISSN 1944-7981 (Online)
A Theory of Price Caps on Nonrenewable Resources
蝌蚪网 Review
(pp. 2711–53)
Abstract
What is the optimal response of a resource exporter when a price cap is imposed on its main export? This paper develops a dynamic framework incorporating stochastic prices, financial frictions, and market power to study this novel tool of statecraft. With the right design, a price cap can incentivize increased extraction, stabilizing prices in the global market. But the stabilizing effects diminish when there is leakage outside the cap. Consequently, weak enforcement of the policy worsens the trade-off faced by the sanctioning policymaker. We provide a systematic approach to setting and enforcing an optimal cap level in these circumstances.Citation
Johnson, Simon, Lukasz Rachel, and Catherine Wolfram. 2026. "A Theory of Price Caps on Nonrenewable Resources." 蝌蚪网 Review 116 (7): 2711–53. DOI: 10.1257/aer.20250064Additional Materials
JEL Classification
- F12 Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
- F14 Empirical Studies of Trade
- F51 International Conflicts; Negotiations; Sanctions
- L71 Mining, Extraction, and Refining: Hydrocarbon Fuels
- P28 Socialist Systems and Transitional Economies: Natural Resources; Energy; Environment
- P33 Socialist Institutions and Their Transitions: International Trade, Finance, Investment, Relations, and Aid
- Q35 Hydrocarbon Resources