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An oligopoly-fringe non-renewable resource game in the presence of a renewable substitute

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  • Benchekroun, Hassan
  • van der Meijden, Gerard
  • Withagen, Cees

Abstract

In accordance with recent empirical evidence, we model the oil market as an oligopoly facing a fringe as well as competition from renewable resources. Within this framework we fully characterize, i.e., for all vectors of initial resource stocks, the equilibrium extraction paths of the fringe and the oligopolists. We show that (i) the sequence of extraction in equilibrium crucially depends on the oligopolists’ market power, (ii) there always exists a phase of simultaneous supply of the oligopolists and the fringe, (iii) the oligopolists pursue a limit-pricing strategy near the end of the extraction horizon, and (iv) an increase in the reserves of the fringe may lead to a decrease in their initial supply.

Suggested Citation

  • Benchekroun, Hassan & van der Meijden, Gerard & Withagen, Cees, 2019. "An oligopoly-fringe non-renewable resource game in the presence of a renewable substitute," Journal of Economic Dynamics and Control, Elsevier, vol. 105(C), pages 1-20.
    • Handle: RePEc:eee:dyncon:v:105:y:2019:i:c:p:1-20
    DOI: 10.1016/j.jedc.2019.05.014
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    References listed on IDEAS

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    Cited by:

    1. Hassan Benchekroun & Miao Dai & Ngo Van Long, 2020. "On the Profitability of Cross-Ownership in Cournot Oligopolies: Stock Sizes Matter," CIRANO Working Papers 2020s-43, CIRANO.
    2. van der Meijden, Gerard & Withagen, Cees, 2019. "Limit pricing, climate policies, and imperfect substitution," Resource and Energy Economics, Elsevier, vol. 58(C).
    3. van der Ploeg, Frederick, 2020. "Race to burn the last ton of carbon and the risk of stranded assets," European Journal of Political Economy, Elsevier, vol. 64(C).
    4. Benchekroun, Hassan & van der Meijden, Gerard & Withagen, Cees, 2020. "OPEC, unconventional oil and climate change - On the importance of the order of extraction," Journal of Environmental Economics and Management, Elsevier, vol. 104(C).
    5. Atems, Bebonchu & Mette, Jehu & Lin, Guoyu & Madraki, Golshan, 2023. "Estimating and forecasting the impact of nonrenewable energy prices on US renewable energy consumption," Energy Policy, Elsevier, vol. 173(C).
    6. Gerard Meijden & Cees Withagen & Hassan Benchekroun, 2022. "An Oligopoly-Fringe Model with HARA Preferences," Dynamic Games and Applications, Springer, vol. 12(3), pages 954-976, September.
    7. Dai, Miao & Benchekroun, Hassan & Long, Ngo Van, 2022. "On the profitability of cross-ownership in Cournot nonrenewable resource oligopolies: Stock size matters," Journal of Environmental Economics and Management, Elsevier, vol. 111(C).
    8. van der Meijden, Gerard & Withagen, Cees, 2020. "Monopoly, unilateral climate policies and limit pricing," Journal of Economic Dynamics and Control, Elsevier, vol. 120(C).
    9. Roos, Nicolas de & Smirnov, Vladimir, 2021. "Collusion, price dispersion, and fringe competition," European Economic Review, Elsevier, vol. 132(C).

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    More about this item

    Keywords

    Oligopoly-fringe; Non-renewable resource; Renewable substitute; Limit pricing;
    All these keywords.

    JEL classification:

    • Q31 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Demand and Supply; Prices
    • Q42 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Alternative Energy Sources
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

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