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Resource Market Power and Levels of Knowledge in General Equilibrium

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  • Marz, Waldemar
  • Pfeiffer, Johannes

Abstract

We analyze monopoly power in a market for a complementary fossil resource like oil in a two country/two period model with international trade in general equilibrium. Focusing on the complex interplay of capital and resource market, we elaborate how these effects feed back into the resource monopolist's extraction decision. His level of knowledge about the economic structure thereby plays a key role. The accumulation of own capital assets over time, together with a recognized influence of extraction on the interest rate, can lead the monopolist to accelerate or postpone extraction. Considering the interaction of resource market and global capital accumulation poses an incentive for the monopolist to accelerate extraction and to exploit the importers' increased resource addiction in the future. The conservationist bias of resource market power can be increased, dampened or reversed through the general equilibrium effects.

Suggested Citation

  • Marz, Waldemar & Pfeiffer, Johannes, 2015. "Resource Market Power and Levels of Knowledge in General Equilibrium," MPRA Paper 63357, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:63357
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    References listed on IDEAS

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    1. van der Meijden, Gerard & van der Ploeg, Frederick & Withagen, Cees, 2015. "International capital markets, oil producers and the Green Paradox," European Economic Review, Elsevier, vol. 76(C), pages 275-297.
    2. Robert Lehmann, 2021. "Forecasting exports across Europe: What are the superior survey indicators?," Empirical Economics, Springer, vol. 60(5), pages 2429-2453, May.
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    5. John Hassler & Per Krusell & Conny Olovsson, 2010. "Oil Monopoly and the Climate," American Economic Review, American Economic Association, vol. 100(2), pages 460-464, May.
    6. Stiglitz, Joseph E, 1976. "Monopoly and the Rate of Extraction of Exhaustible Resources," American Economic Review, American Economic Association, vol. 66(4), pages 655-661, September.
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    9. Harold Hotelling, 1931. "The Economics of Exhaustible Resources," Journal of Political Economy, University of Chicago Press, vol. 39(2), pages 137-137.
    10. van der Meijden, Gerard & van der Ploeg, Frederick & Withagen, Cees, 2015. "International capital markets, oil producers and the Green Paradox," European Economic Review, Elsevier, vol. 76(C), pages 275-297.
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    Cited by:

    1. Johannes Pfeiffer, 2017. "Fossil Resources and Climate Change – The Green Paradox and Resource Market Power Revisited in General Equilibrium," ifo Beiträge zur Wirtschaftsforschung, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, number 77.
    2. Marz, Waldemar & Pfeiffer, Johannes, 2020. "Petrodollar recycling, oil monopoly, and carbon taxes," Journal of Environmental Economics and Management, Elsevier, vol. 100(C).
    3. Waldemar Marz, 2019. "Complex dimensions of climate policy: the role of political economy, capital markets, and urban form," ifo Beiträge zur Wirtschaftsforschung, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, number 85.

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    More about this item

    Keywords

    Monopoly; fossil energy resources; Hotelling rule; general equilibrium; capital market; sovereign wealth;
    All these keywords.

    JEL classification:

    • D42 - Microeconomics - - Market Structure, Pricing, and Design - - - Monopoly
    • D58 - Microeconomics - - General Equilibrium and Disequilibrium - - - Computable and Other Applied General Equilibrium Models
    • D9 - Microeconomics - - Micro-Based Behavioral Economics
    • Q3 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation

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