On Price Taking Behaviour in a Non-renewable 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 be- comes 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 InfoPaper provided by Oxford Centre for the Analysis of Resource Rich Economies, University of Oxford in its series OxCarre Working Papers with number 080.
Date of creation: 2012
Date of revision:
cartel-fringe; dominant firm versus fringe; price taking; nonrenewable resources; dynamic games; open-loop versus closed-loop strategies;
Other versions of this item:
- Benchekroun, Hassan & Withagen, Cees, 2012. "On price taking behavior in a nonrenewable resource cartel–fringe game," Games and Economic Behavior, Elsevier, vol. 76(2), pages 355-374.
- 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, 2010. "On Price Taking Behavior In A Nonrenewable Resource Cartel-Fringe Game," Departmental Working Papers 2010-02, 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
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-04-20 (All new papers)
- NEP-BEC-2013-04-20 (Business Economics)
- NEP-COM-2013-04-20 (Industrial Competition)
- NEP-ENV-2013-04-20 (Environmental Economics)
- NEP-GTH-2013-04-20 (Game Theory)
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