On price taking behavior in a nonrenewable resource cartel–fringe game
AbstractWe consider a nonrenewable resource game with one cartel and a set of fringe members. We show that (i) the outcomes of the closed-loop and the open-loop nonrenewable resource game with the fringe members as price takers (the cartel–fringe game à la Salant, 1976) coincide and (ii) when the number of fringe firms becomes arbitrarily large, the equilibrium outcome of the closed-loop Nash game does not coincide with the equilibrium outcome of the closed-loop cartel–fringe game. Thus, the outcome of the cartel–fringe open-loop equilibrium can be supported as an outcome of a subgame-perfect equilibrium. However the interpretation of the cartel–fringe model, where from the outset the fringe is assumed to be price taker, as a limit case of an asymmetric oligopoly with the agents playing Nash–Cournot, does not extend to the case where firms can use closed-loop strategies.
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Bibliographic InfoArticle provided by Elsevier in its journal Games and Economic Behavior.
Volume (Year): 76 (2012)
Issue (Month): 2 ()
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Web page: http://www.elsevier.com/locate/inca/622836
Cartel–fringe; Dominant firm versus fringe; Price taking; Nonrenewable resources; Dynamic games; Open-loop versus closed-loop strategies;
Other versions of this item:
- Hassan Benchekroun & Cees Withagen, 2010. "On Price Taking Behavior In A Nonrenewable Resource Cartel-Fringe Game," Departmental Working Papers 2010-02, McGill University, Department of Economics.
- Hassan Benchekroun & Cees Withagen, 2012. "On Price Taking Behaviour in a Non-renewable Resource Cartel-Fringe Game," OxCarre Working Papers 080, Oxford Centre for the Analysis of Resource Rich Economies, University of Oxford.
- BENCHEKROUN, Hassan & WITHAGEN, Cees, 2010. "On Price Taking Behavior in a Nonrenewable Resource Cartel-Fringe Game," Cahiers de recherche 11-2010, Centre interuniversitaire de recherche en économie quantitative, CIREQ.
- Hassan Benchekroun & Cees Withagen, 2008. "Nonrenewable Resource Oligopolies And The Cartel-Fringe Game," Departmental Working Papers 2008-02, McGill University, Department of Economics.
- D43 - Microeconomics - - Market Structure and Pricing - - - Oligopoly and Other Forms of Market Imperfection
- Q30 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - General
- L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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