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Welfare Implications of Leadership in a Resource Market Under Bilateral Monopoly

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  • Kenji Fujiwara
  • Ngo Van Long

Abstract

Does a country strictly gain if it acts as a leader in a resource market under bilateral monopoly? Using differential games, we show that the answer is "yes"" when leadership can be exercised globally (global Stackelberg leadership), but possibly ""no"" when it is exercised only at each stage (stagewise Stackelberg leadership). On the other hand, world welfare under Nash equilibrium is strictly higher than under global Stackelberg equilibrium. Regardless of which country is the leader, world welfare under stagewise Stackelberg leadership is higher than under global Stackelberg leadership." Quand un pays est un leader dans un marché d'une ressource non-renouvelable, est-ce que son niveau de bien-être devient plus élevé? On montre que la réponse est affirmative quand il s'agit d'un leadership global, mais elle peut être négative dans le cas d'un leadership par étapes. Par contre, le niveau de bien-être mondial sous l'équilibre de Nash est supérieur à celui qui est le résultat de l'équilibre global de Stackelberg. Du point de vue du bien-être mondial, l'équilibre de Stackelberg par étapes est meilleur que l'équilibre global de Stackelberg.

Suggested Citation

  • Kenji Fujiwara & Ngo Van Long, 2010. "Welfare Implications of Leadership in a Resource Market Under Bilateral Monopoly," CIRANO Working Papers 2010s-16, CIRANO.
  • Handle: RePEc:cir:cirwor:2010s-16
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    References listed on IDEAS

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    1. repec:wsi:igtrxx:v:14:y:2012:i:04:n:s021919891240004x is not listed on IDEAS
    2. Michielsen, Thomas O., 2014. "Strategic resource extraction and substitute development," Resource and Energy Economics, Elsevier, vol. 36(2), pages 455-468.
    3. Christian Beermann, 2015. "Climate Policy and the Intertemporal Supply of Fossil Resources," ifo Beiträge zur Wirtschaftsforschung, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, number 62, March.
    4. Keutiben, Octave, 2014. "On capturing foreign oil rents," Resource and Energy Economics, Elsevier, vol. 36(2), pages 542-555.
    5. Michael Caputo & Chen Ling, 2015. "Intrinsic Comparative Dynamics of Locally Differentiable Feedback Stackelberg Equilibria," Dynamic Games and Applications, Springer, vol. 5(1), pages 1-25, March.
    6. Seiichi KATAYAMA & Ngo Van LONG & Hiroshi OHTA, 2013. "Carbon Taxes in a Trading World," GSICS Working Paper Series 26, Graduate School of International Cooperation Studies, Kobe University.
    7. Ngo Long, 2011. "Dynamic Games in the Economics of Natural Resources: A Survey," Dynamic Games and Applications, Springer, vol. 1(1), pages 115-148, March.
    8. Kenji Fujiwara & Ngo Van Long, 2012. "Optimal Tariffs on Exhaustible Resources: The Case of a Quantity Setting Cartel," CESifo Working Paper Series 3721, CESifo Group Munich.
    9. Kenji Fujiwara & Ngo Van Long, 2012. "Optimal Tariffs On Exhaustible Resources: The Case Of Quantity-Setting," International Game Theory Review (IGTR), World Scientific Publishing Co. Pte. Ltd., vol. 14(04), pages 1-17.

    More about this item

    Keywords

    dynamic game; exhaustible resource; Stackelberg leadership. ; jeu dynamique; ressources non-renouvelables; leadership de Stackelberg.;

    JEL classification:

    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
    • Q34 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Natural Resources and Domestic and International Conflicts
    • F18 - International Economics - - Trade - - - Trade and Environment

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