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Welfare Implications of Leadership in a Resource Market under Bilateral Monopoly

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  • Kenji Fujiwara
  • Ngo Long

Abstract

Formulating a dynamic game model of a world exhaustible resource market, this paper studies welfare implications of Stackelberg leaderships for an individual country and the world. We overcome the problem of time-inconsistency by imposing a \credibility condition" on the Markovian strategy of the Stackelberg leader. Under this condition, we show that the presence of a global Stackelberg leader leaves the follower worse o relative to the Nash equilibrium. Moreover, the world welfare is highest in the Nash equilibrium as compared with the two Stackelberg equilibria.
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(This abstract was borrowed from another version of this item.)
(This abstract was borrowed from another version of this item.)

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  • Kenji Fujiwara & Ngo Long, 2011. "Welfare Implications of Leadership in a Resource Market under Bilateral Monopoly," Dynamic Games and Applications, Springer, vol. 1(4), pages 479-497, December.
    • Handle: RePEc:spr:dyngam:v:1:y:2011:i:4:p:479-497
    DOI: 10.1007/s13235-011-0036-1
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    21. Liski, Matti & Tahvonen, Olli, 2004. "Can carbon tax eat OPEC's rents?," Journal of Environmental Economics and Management, Elsevier, vol. 47(1), pages 1-12, January.
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    Cited by:

    1. Rémy Dullieux & Lionel Ragot & Katheline Schubert, 2011. "Carbon Tax and OPEC’s Rents Under a Ceiling Constraint," Scandinavian Journal of Economics, Wiley Blackwell, vol. 113(4), pages 798-824, December.
    2. Kenji Fujiwara & Ngo Van Long, 2012. "Optimal Tariffs On Exhaustible Resources: The Case Of Quantity-Setting," International Game Theory Review (IGTR), World Scientific Publishing Co. Pte. Ltd., vol. 14(04), pages 1-17.
    3. Christian Beermann, 2015. "Climate Policy and the Intertemporal Supply of Fossil Resources," ifo Beiträge zur Wirtschaftsforschung, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, number 62.
    4. Keutiben, Octave, 2014. "On capturing foreign oil rents," Resource and Energy Economics, Elsevier, vol. 36(2), pages 542-555.
    5. Michael Caputo & Chen Ling, 2015. "Intrinsic Comparative Dynamics of Locally Differentiable Feedback Stackelberg Equilibria," Dynamic Games and Applications, Springer, vol. 5(1), pages 1-25, March.
    6. Jaakkola, Niko, 2019. "Carbon taxation, OPEC and the end of oil," Journal of Environmental Economics and Management, Elsevier, vol. 94(C), pages 101-117.
    7. Seiichi KATAYAMA & Ngo Van LONG & Hiroshi OHTA, 2013. "Carbon Taxes in a Trading World," GSICS Working Paper Series 26, Graduate School of International Cooperation Studies, Kobe University.
    8. Michielsen, Thomas O., 2014. "Strategic resource extraction and substitute development," Resource and Energy Economics, Elsevier, vol. 36(2), pages 455-468.
    9. Ngo Long, 2011. "Dynamic Games in the Economics of Natural Resources: A Survey," Dynamic Games and Applications, Springer, vol. 1(1), pages 115-148, March.
    10. Kenji Fujiwara & Ngo Van Long, 2012. "Optimal Tariffs on Exhaustible Resources: The Case of a Quantity Setting Cartel," CESifo Working Paper Series 3721, CESifo.

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    More about this item

    Keywords

    Dynamic game; Exhaustible resource; Stackelberg leadership; Feedback equilibria;
    All these keywords.

    JEL classification:

    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
    • Q34 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Natural Resources and Domestic and International Conflicts
    • F18 - International Economics - - Trade - - - Trade and Environment

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