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Oligopoly with common resource: A Lindahl-Cournot approach

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  • Jacques Thépot

    (LaRGE Research Center, Université de Strasbourg)

Abstract

This paper is motivated by two correlated trends observed in the digital economy: (i) the increasing need for common infrastructures providing data and facilities (ii) the monopolization of key industries. We develop a Cournot oligopoly model where a public good is used as common resource of firms with heterogeneous productivities. The public good is provided by a public agency charging Lindahl prices as wholesale prices. When the agency is a zero-profit entity, the market equilibrium price is an increasing function of the Herfindahl index of the productivities. This result is extended to alternative situation in terms of objective and cost structure of the agency. In mixed resource-based industries, private provision of the resource is also available. Strong firms (with high productivity) may have an incentive to share the common resource with the weak ones and then to reduce the use of the private resource. The misrevelation of productivities is an essential issue in this public good context. It is proved here that productivities are underevaluated in the common resource case and overevaluated in the private case.

Suggested Citation

  • Jacques Thépot, 2022. "Oligopoly with common resource: A Lindahl-Cournot approach," Working Papers of LaRGE Research Center 2022-03, Laboratoire de Recherche en Gestion et Economie (LaRGE), Université de Strasbourg.
    • Handle: RePEc:lar:wpaper:2022-03
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    More about this item

    Keywords

    oligopoly; commons; Lindahl prices; misreporting.;
    All these keywords.

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • H41 - Public Economics - - Publicly Provided Goods - - - Public Goods

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