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Nonrenewable Resource Oligopolies And The Cartel-Fringe Game

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  • Hassan Benchekroun

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  • Cees Withagen

    ()

Abstract

We specify and solve a closed-loop dominant firm nonrenewable resource game, with a price-taking fringe. We show that (i) the outcomes of the closed-loop and the open-loop dominant firm nonrenewable resource game (a la Salant 1976) coincide and (ii) when the number of fringe firms becomes arbitrarily large, the equilibrium outcome of the closed-loop oligopoly game does not coincide with the equilibrium outcome of the closed-loop dominant firm nonrenewable resource game. Thus, the interpretation of the dominant firm model, where the fringe is assumed from the outset to be the price-taker, as a limit case of an asymmetric oligopoly where the number of fringe firms tends to infinity, does not extend to the case where firms can use closed-loop strategies.

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Bibliographic Info

Paper provided by McGill University, Department of Economics in its series Departmental Working Papers with number 2008-02.

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Length: 30 pages
Date of creation: Jan 2008
Date of revision:
Handle: RePEc:mcl:mclwop:2008-02

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  1. Frederick Van der Ploeg & Cees A. Withagen, 2010. "Is There Really a Green Paradox?," CESifo Working Paper Series 2963, CESifo Group Munich.
  2. John Hartwick, 2006. "The Quadratic Oil Extraction Oligopoly," Working Papers 1095, Queen's University, Department of Economics.
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  5. Newbery, David M G, 1981. "Oil Prices, Cartels, and the Problem of Dynamic Inconsistency," Economic Journal, Royal Economic Society, vol. 91(363), pages 617-46, September.
  6. BENCHEKROUN, Hassan & HALSEMA, Alex & WITHAGEN, Cees, 2008. "On Nonrenewable Resource Oligopolies : The Asymmetric Case," Cahiers de recherche 13-2008, Centre interuniversitaire de recherche en économie quantitative, CIREQ.
  7. Roberts, Kevin, 1980. "The limit points of monopolistic competition," Journal of Economic Theory, Elsevier, vol. 22(2), pages 256-278, April.
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  10. Reinganum, Jennifer F & Stokey, Nancy L, 1985. "Oligopoly Extraction of a Common Property Natural Resource: The Importance of the Period of Commitment in Dynamic Games," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 26(1), pages 161-73, February.
  11. Mukesh Eswaran & Tracy Lewis, 1985. "Exhaustible Resources and Alternative Equilibrium Concepts," Canadian Journal of Economics, Canadian Economics Association, vol. 18(3), pages 459-73, August.
  12. Groot, F. & Withagen, C.A.A.M. & Zeeuw, A.J. de, 2003. "Strong time-consistency in the cartel-versus-fringe model," Open Access publications from Tilburg University urn:nbn:nl:ui:12-117032, Tilburg University.
  13. Gaudet, G. & Moreaux, M. & Salant, S.W., 1997. "Private Storage of Common Property," Papers 97-08, Michigan - Center for Research on Economic & Social Theory.
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  18. Groot, F. & Withagen, C.A.A.M. & Zeeuw, A.J. de, 1992. "Note on the open-loop von Stackelberg equilibrium in the cartel versus fringe model," Open Access publications from Tilburg University urn:nbn:nl:ui:12-377500, Tilburg University.
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  22. Dockner,Engelbert J. & Jorgensen,Steffen & Long,Ngo Van & Sorger,Gerhard, 2000. "Differential Games in Economics and Management Science," Cambridge Books, Cambridge University Press, number 9780521637329, April.
  23. Richard J. Gilbert, 1978. "Dominant Firm Pricing Policy in a Market for an Exhaustible Resource," Bell Journal of Economics, The RAND Corporation, vol. 9(2), pages 385-395, Autumn.
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Cited by:
  1. Kicsiny, R. & Varga, Z. & Scarelli, A., 2014. "Backward induction algorithm for a class of closed-loop Stackelberg games," European Journal of Operational Research, Elsevier, vol. 237(3), pages 1021-1036.

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