Strategic Considerations of Critical Mineral Depletion and Recycling Under Markovian Competition

With the exhaustion of non-renewable resources and the increasing importance of criti- cal materials for the transition to clean technology, recycling is being called into action. Fulfilling demand for critical minerals involves challenges such as supply chain disruption, resource depletion and positive minimum demand, however. Under Markovian competi- tion between an exporting cartel and an importing country, we demonstrate that (i) if both virgin and recyclable resources are abundant, multiple subgame perfect Markovian Nash equilibria arise; (ii) if the exporting cartel can choose which Nash equilibrium to follow, when the cost of exploiting the non-renewable resource is sufficiently high, stopping the supply of virgin resource to the market is the Nash equilibrium; (iii) the consequence of this choice is that when the recyclable resource is exhausted, there is no Nash equilibrium anymore, although there remains virgin resource to exploit.