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Is the Leading Role Desirable?: A Simulation Analysis of the Stackelberg Behavior in World Petroleum Market

  • Zili Yang

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    This article explores extraction profiles in the Stackelberg equilibrium of exhaustible resource industry. Calibrated with real data of world petroleum market, the Stackelberg and Cournot–Nash equilibriums are solved numerically. The properties of the Stackelberg equilibrium are compared and contrasted with the benchmark open-loop Cournot–Nash equilibrium. Simulation results indicate that the leader’s gains are limited in the Stackelberg strategic setting. Methodologically, this article pioneers solving the Stackelberg game numerically in a dynamic and empirical model. Copyright Springer Science+Business Media New York 2013

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    File URL: http://hdl.handle.net/10.1007/s10614-012-9335-x
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    Article provided by Society for Computational Economics in its journal Computational Economics.

    Volume (Year): 42 (2013)
    Issue (Month): 1 (June)
    Pages: 133-150

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    Handle: RePEc:kap:compec:v:42:y:2013:i:1:p:133-150
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    1. Groot, F. & Withagen, C.A.A.M. & de Zeeuw, A.J., 2003. "Strong time-consistency in the cartel-versus-fringe model," Other publications TiSEM 5ba46a2e-d763-4a8c-939b-3, Tilburg University, School of Economics and Management.
    2. BENCHEKROUN, Hassan & HALSEMA, Alex & WITHAGEN, Cees, 2008. "On Nonrenewable Resource Oligopolies : The Asymmetric Case," Cahiers de recherche 13-2008, Centre interuniversitaire de recherche en économie quantitative, CIREQ.
    3. Van Der Ploeg, F., 1987. "Inefficiency of credible strategies in oligopolistic resource markets with uncertainty," Journal of Economic Dynamics and Control, Elsevier, vol. 11(1), pages 123-145, March.
    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. 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.
    6. Groot, Fons & Withagen, Cees & de Zeeuw, Aart, 2000. "Open-loop von Stackelberg equilibrium in the cartel-vs.-fringe model," Energy Economics, Elsevier, vol. 22(2), pages 209-223, April.
    7. Hamilton, Jonathan H. & Slutsky, Steven M., 1990. "Endogenous timing in duopoly games: Stackelberg or cournot equilibria," Games and Economic Behavior, Elsevier, vol. 2(1), pages 29-46, March.
    8. von Stengel, Bernhard, 2010. "Follower payoffs in symmetric duopoly games," Games and Economic Behavior, Elsevier, vol. 69(2), pages 512-516, July.
    9. 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.
    10. 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.
    11. Polasky, Stephen, 1992. "Do oil producers act as 'Oil'igopolists?," Journal of Environmental Economics and Management, Elsevier, vol. 23(3), pages 216-247, November.
    12. 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.
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