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Some Effects of Asymmetries in a Common Pool Natural Resource Oligopoly

Author

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  • Hassan Benchekroun
  • Gérard Gaudet
  • Hervé Lohoues

Abstract

We consider a renewable resource being exploited in common by firms that compete both in the output market and in the exploitation of the resource. We show that the introduction of the slightest cost differentiation among the firms can have a drastic effect on the nature of the equilibria that may be expected as compared to the identical cost case. To do this, we take as a benchmark case a Markov Perfect Nash Equilibrium that exists with identical cost firms, with the property that the firms play a linear strategy up to some endogenously determined threshold level of the stock and the static Cournot equilibrium strategy beyond that threshold. Having shown that an equilibrium of that nature is not sustainable with asymmetric cost, we fully characterize a Markov Perfect Nash Equilibrium of the differential game for that case.

Suggested Citation

  • Hassan Benchekroun & Gérard Gaudet & Hervé Lohoues, 2012. "Some Effects of Asymmetries in a Common Pool Natural Resource Oligopoly," Cahiers de recherche 14-2012, Centre interuniversitaire de recherche en économie quantitative, CIREQ.
    • Handle: RePEc:mtl:montec:14-2012
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    Cited by:

    1. Ngo Long, 2015. "Dynamic Games Between Firms and Infinitely Lived Consumers: A Review of the Literature," Dynamic Games and Applications, Springer, vol. 5(4), pages 467-492, December.
    2. Michele Bisceglia, 2020. "Optimal taxation in a common resource oligopoly game," Journal of Economics, Springer, vol. 129(1), pages 1-31, January.

    More about this item

    JEL classification:

    • Q20 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - General
    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games

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