OPEC as a political and economical entity
This paper assumes that the decision makers of OPEC (or at least of its core members) are interested in both profits and political payoffs (support, popularity, being a hero of the Arab or Islamic street, etc.). The oil weapon, i.e. a reduction of output is the most powerful instrument to obtain political payoffs from harming the West, which can be also profitable in the short run due to the high prices implied by sluggish demand for OPEC oil. The analysis shows that this political objective reduces longrun supply and includes the possibility that it is optimal to 'kill the goose that lays the golden eggs' if initial demand is below a threshold (and multiple steady states exist).
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Michael Rauscher, 1992. "Cartel instability and periodic price shocks," Journal of Economics, Springer, vol. 55(2), pages 209-219, June.
- Robert S. Pindyck, 1979. "The Structure of World Energy Demand," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262661772.
- Wirl, Franz, 1991. "Economics of (oil) price politics: Penalizing price changes," Journal of Policy Modeling, Elsevier, vol. 13(4), pages 515-527.
- Skiba, A K, 1978. "Optimal Growth with a Convex-Concave Production Function," Econometrica, Econometric Society, vol. 46(3), pages 527-539, May.
- Wirl, Franz, 1991. "Dynamic Demand, Consumers' Expectations and Monopolistic Resource Extraction: An Application to OPEC Pricing Policies," Empirical Economics, Springer, vol. 16(4), pages 379-400.
- James Levinsohn & Steven Berry & Ariel Pakes, 1999. "Voluntary Export Restraints on Automobiles: Evaluating a Trade Policy," American Economic Review, American Economic Association, vol. 89(3), pages 400-430, June.
- Hogan, William W., 1989. "A dynamic putty--semi-putty model of aggregate energy demand," Energy Economics, Elsevier, vol. 11(1), pages 53-69, January.
- Wagener, F. O. O., 2003. "Skiba points and heteroclinic bifurcations, with applications to the shallow lake system," Journal of Economic Dynamics and Control, Elsevier, vol. 27(9), pages 1533-1561, July.
- M. A. Adelman, 1990. "The 1990 Oil Shock is Like the Others," The Energy Journal, International Association for Energy Economics, vol. 0(Number 4), pages 1-13.
- Paul Krugman, 1991. "History versus Expectations," The Quarterly Journal of Economics, Oxford University Press, vol. 106(2), pages 651-667.
- Tvedt, Jostein, 2002. "The effect of uncertainty and aggregate investments on crude oil price dynamics," Energy Economics, Elsevier, vol. 24(6), pages 615-628, November.
- Wirl, Franz & Feichtinger, Gustav, 2005. "History dependence in concave economies," Journal of Economic Behavior & Organization, Elsevier, vol. 57(4), pages 390-407, August.
- Griffin, James M & Xiong, Weiwen, 1997. "The Incentive to Cheat: An Empirical Analysis of OPEC," Journal of Law and Economics, University of Chicago Press, vol. 40(2), pages 289-316, October.
- Felipe L. Aguerrevere, 2003. "Equilibrium Investment Strategies and Output Price Behavior: A Real-Options Approach," Review of Financial Studies, Society for Financial Studies, vol. 16(4), pages 1239-1272.
- Ramanathan, R., 1999. "Short- and long-run elasticities of gasoline demand in India: An empirical analysis using cointegration techniques," Energy Economics, Elsevier, vol. 21(4), pages 321-330, August.
- 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 238-251, May.
- Mason, Charles F. & Polasky, Stephen, 2005. "What motivates membership in non-renewable resource cartels?: The case of OPEC," Resource and Energy Economics, Elsevier, vol. 27(4), pages 321-342, November.
- Robert A. Marshalla & Dale M. Nesbitt, 1986. "Future World Oil Prices and Production Levels: An Economic Analysis," The Energy Journal, International Association for Energy Economics, vol. 0(Number 1), pages 1-22.
- Griffin, James M, 1985. "OPEC Behavior: A Test of Alternative Hypotheses," American Economic Review, American Economic Association, vol. 75(5), pages 954-963, December.
- Wirl, Franz & Feichtinger, Gustav, 2006. "History versus expectations: Increasing returns or social influence?," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 35(5), pages 877-888, October.
- Brock, W A & Dechert, W D, 1985. "Dynamic Ramsey Pricing," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 26(3), pages 569-591, October.
- Alves, Denisard C. O. & De Losso da Silveira Bueno, Rodrigo, 2003. "Short-run, long-run and cross elasticities of gasoline demand in Brazil," Energy Economics, Elsevier, vol. 25(2), pages 191-199, March.