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On von Stackelberg Leadership in a Cartel-Fringe-Renewables' Model of Exhaustible Resource Extraction

Author

Listed:
  • Simon Elgersma
  • Hassan Benchekroun
  • Gerard Cornelis van der Meijden
  • Cees A. Withagen

Abstract

We characterize the time-consistent solution of a cartel-fringe model of exhaustible resource extraction in which the cartel credibly acts as a von Stackelberg leader and renewable and backstop substitutes are available. For every configuration of initial resource stocks, we identify the equilibrium sequence that arises in the feedback von Stackelberg equilibrium (FBSE). We show that the FBSE exhibits three possible equilibrium extraction paths. Two of them start with a phase of simultaneous supply by the cartel and the fringe, whereas the third one starts with a phase in which the cartel is the sole supplier. We then compare the FBSE with the Nash-Cournot equilibrium (CFNE) and the open-loop von Stackelberg equilibrium (OLSE). A key distinction between the FBSE and the OLSE is that the latter never features an initial phase of simultaneous extraction, whereas such a phase emerges in the FBSE for a range of initial stock configurations. An important departure from the CFNE is that the FBSE allows for an initial phase of cartel-only supply, in which the cartel sets the price so as to keep the fringe at bay.

Suggested Citation

  • Simon Elgersma & Hassan Benchekroun & Gerard Cornelis van der Meijden & Cees A. Withagen, 2026. "On von Stackelberg Leadership in a Cartel-Fringe-Renewables' Model of Exhaustible Resource Extraction," CESifo Working Paper Series 12648, CESifo.
    • Handle: RePEc:ces:ceswps:_12648
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    References listed on IDEAS

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    Keywords

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    JEL classification:

    • Q01 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - General - - - Sustainable Development
    • Q30 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - General
    • Q38 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Government Policy (includes OPEC Policy)
    • Q42 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Alternative Energy Sources

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