Monopoly power can be disadvantageous in the extraction of a durable nonrenewable resource
AbstractThe authors study a Markov equilibrium for the case where a monopolist extracts a nonrenewable resource which is converted to a durable good, which then depreciates at a constant rate. They show that, in a stationary, continuous time model (infinite horizon, infinitesimal period of commitment), monopoly power can be disadvantageous. Numerical experiments confirm that this can also occur in a finite horizon, discrete model. This result is compared with previous examples of disadvantageous market power, obtained using two-period models. Copyright 1996 by Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association.
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Bibliographic InfoPaper provided by Economics Division, School of Social Sciences, University of Southampton in its series Discussion Paper Series In Economics And Econometrics with number 9209.
Date of creation: 01 Jan 1992
Date of revision:
Other versions of this item:
- Karp, Larry, 1996. "Monopoly Power Can Be Disadvantageous in the Extraction of a Durable Nonrenewable Resource," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 37(4), pages 825-49, November.
- Karp, Larry, 1995. "Monopoly Power can be Disadvantageous in the Extraction of a Durable Nonrenewable Resource," Department of Agricultural & Resource Economics, UC Berkeley, Working Paper Series qt4cs0m1vb, Department of Agricultural & Resource Economics, UC Berkeley.
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