Nonrenewable Resource Oligopolies And The Cartel-Fringe Game
We specify and solve a closed-loop dominant firm nonrenewable resource game, with a price-taking fringe. We show that (i) the outcomes of the closed-loop and the open-loop dominant firm nonrenewable resource game (a la Salant 1976) coincide and (ii) when the number of fringe firms becomes arbitrarily large, the equilibrium outcome of the closed-loop oligopoly game does not coincide with the equilibrium outcome of the closed-loop dominant firm nonrenewable resource game. Thus, the interpretation of the dominant firm model, where the fringe is assumed from the outset to be the price-taker, as a limit case of an asymmetric oligopoly where the number of fringe firms tends to infinity, does not extend to the case where firms can use closed-loop strategies.
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