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Monopoly Power can be Disadvantageous in the Extraction of a Durable Nonrenewable Resource

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  • Karp, Larry

Abstract

We 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. We show that in a stationary, continuous time model (infinite horizon, infinitesimal period of commitment) monopoly power can be disadvantageous. Numerical experiments c o n f i that this can also occur in a finite horizon, discrete model. This result is compared to previous examples of disadvantageous market power, obtained using two-period models.

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  • 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.
    • Handle: RePEc:cdl:agrebk:qt4cs0m1vb
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