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Strong time-consistency in the cartel-versus-fringe model

  • Groot, Fons
  • Withagen, Cees
  • de Zeeuw, Aart

In the seventies and eighties, the theory of exhaustible natural resources developed a branch, which was called the cartel-versus-fringe model, to characterize markets with one large coherent cartel and a big number of small suppliers named the fringe.It was considered appropriate to use the von Stackelberg solution concept but because solutions could only be derived in an open-loop framework time-inconsistency resulted.This paper solves time-inconsistency in the cartel-versus-fringe model and provides the feedback von Stackelberg equilibrium for all cost configurations.

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Article provided by Elsevier in its journal Journal of Economic Dynamics and Control.

Volume (Year): 28 (2003)
Issue (Month): 2 (November)
Pages: 287-306

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Handle: RePEc:eee:dyncon:v:28:y:2003:i:2:p:287-306
Contact details of provider: Web page: http://www.elsevier.com/locate/jedc

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  1. Salant, Stephen W, 1976. "Exhaustible Resources and Industrial Structure: A Nash-Cournot Approach to the World Oil Market," Journal of Political Economy, University of Chicago Press, vol. 84(5), pages 1079-93, October.
  2. Fischer, Stanley, 1980. "Dynamic inconsistency, cooperation and the benevolent dissembling government," Journal of Economic Dynamics and Control, Elsevier, vol. 2(1), pages 93-107, May.
  3. Larry Karp & David M. Newbery, 1992. "Dynamically Consistent Oil Import Tariffs," Canadian Journal of Economics, Canadian Economics Association, vol. 25(1), pages 1-21, February.
  4. Lewis, Tracy R. & Schmalensee, Richard., 1979. "On oligopolistic markets for nonrenewable natural resources," Working papers 1052-79., Massachusetts Institute of Technology (MIT), Sloan School of Management.
  5. Pindyck, Robert S, 1978. "Gains to Producers from the Cartelization of Exhaustible Resources," The Review of Economics and Statistics, MIT Press, vol. 60(2), pages 238-51, May.
  6. Karp, Larry & Newbery, David M., 1991. "Optimal tariffs on exhaustible resources," Journal of International Economics, Elsevier, vol. 30(3-4), pages 285-299, May.
  7. A. M. Ulph & G. M. Folie, 1980. "Exhaustible Resources and Cartels: An Intertemporal Nash-Cournot Model," Canadian Journal of Economics, Canadian Economics Association, vol. 13(4), pages 645-58, November.
  8. Karp, Larry & Newbery, David M G, 1989. "Intertemporal Consistency Issues in Depletable Resources," CEPR Discussion Papers 346, C.E.P.R. Discussion Papers.
  9. Groot, F. & Withagen, C.A.A.M. & de Zeeuw, A.J., 1989. "Theory of natural exhaustible resources : The cartel-versus-fringe model reconsidered," Discussion Paper 1989-24, Tilburg University, Center for Economic Research.
  10. Karp, Larry & Tahvonen, Olli, 1995. "International Trade in Exhaustible Resources: A Cartel-Competitive Fringe Model," Department of Agricultural & Resource Economics, UC Berkeley, Working Paper Series qt9dt5614j, Department of Agricultural & Resource Economics, UC Berkeley.
  11. 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.
  12. Salant, Stephen W., 1982. "Imperfect competition in the international energy market: a computerized Nash-Cournot model," MPRA Paper 12021, University Library of Munich, Germany.
  13. Groot, Fons & Withagen, Cees & de Zeeuw, Aart, 1992. "Note on the Open-Loop von Stackelberg Equilibrium in the Cartel versus Fringe Model," Economic Journal, Royal Economic Society, vol. 102(415), pages 1478-84, November.
  14. Jovanovic, Boyan & Rosenthal, Robert W., 1986. "Anonymous Sequential Games," Working Papers 86-12, C.V. Starr Center for Applied Economics, New York University.
  15. 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.
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