International Trade in Exhaustible Resources: A Cartel-Competitive Fringe Model
We characterize the open-loop and the Markov-Perfect Stackelberg equilibria for a differential game in which a cartel and a fringe extract a non-renewable resource. Both agents have stock dependent costs. The comparison of initial market shares, across different equilibria, depends on which firm has the cost advantage. The cartel's steady-state market share is largest in the open-loop equilibrium and the smallest in the competitive equilibrium. The initial price may be larger in the Markov equilibria (relative to the open-loop equilibrium), so less market power is consistent with an equilibrium that appears less competitive. The benefit to cartelization increases with market share.
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|Date of creation:||Jan 1996|
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- Groot, Fons & Withagen, Cees & de Zeeuw, Aart, 1992. "Note on the Open-Loop von Stackelberg Equilibrium in the Cartel versus Fringe Model," Economic Journal, Royal Economic Society, vol. 102(415), pages 1478-84, November.
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