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Anti-Conservationist Effects of the Conservationist Oil Cartel

In: Natural Resource Pricing and Rents

Author

Listed:
  • Andrey Vavilov

    (Institute for Financial Studies)

  • Georgy Trofimov

    (Institute for Financial Studies)

Abstract

A resource monopoly behaves as a “conservationist” in models of exhaustible resources. It extracts less today and keeps more resource under the ground than the competitive market does. In this chapter, we consider a model of economically recoverable resources and show that, in the presence of a high-cost competitive fringe, the cartel’s “conservationism” turns into a too early and too intensive resource extraction by the fringe. The “anti-conservationism” of the equilibrium extraction path selected by the fringe proves to be a robust property of the model. As a result, the cartel acts as if it was a strategic player planning its long-term moves to accelerate the depletion of competitors’ resources and to aggravate their competitive disadvantages.

Suggested Citation

  • Andrey Vavilov & Georgy Trofimov, 2021. "Anti-Conservationist Effects of the Conservationist Oil Cartel," Contributions to Economics, in: Natural Resource Pricing and Rents, chapter 0, pages 289-314, Springer.
    • Handle: RePEc:spr:conchp:978-3-030-76753-2_11
    DOI: 10.1007/978-3-030-76753-2_11
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