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The Double Curse of a Common Property Productive Asset Oligopoly

  • BENCHEKROUN, Hassan

We build a subgame perfect Nash equilibrium of a common property productive asset oligopoly. We derive two surprising results. First, the steady state level of asset can be a decreasing function of the asset’s implicit growth rate. This phenomenon arises when the initial stock of asset is below a certain threshold. It represents a double curse for a common property productive asset where the well-known tragedy of the commons due to a lack of property rights is exacerbated by an increase in the productivity of the asset. Second, we show that a reduction in the number of firms exploiting the asset can, in the short run, result in an increase of the industry’s exploitation and a decrease of the level of the asset’s stock.

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Paper provided by Centre interuniversitaire de recherche en économie quantitative, CIREQ in its series Cahiers de recherche with number 02-2005.

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Length: 31 pages
Date of creation: 2005
Date of revision:
Handle: RePEc:mtl:montec:02-2005
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  1. Salant, Stephen W & Switzer, Sheldon & Reynolds, Robert J, 1983. "Losses from Horizontal Merger: The Effects of an Exogenous Change in Industry Structure on Cournot-Nash Equilibrium," The Quarterly Journal of Economics, MIT Press, vol. 98(2), pages 185-99, May.
  2. Benhabib, Jess & Radner, Roy, 1992. "The Joint Exploitation of a Productive Asset: A Game-Theoretic Approach," Economic Theory, Springer, vol. 2(2), pages 155-90, April.
  3. Rabah Amir, 2000. "On the Effects of Entry in Cournot Markets," Econometric Society World Congress 2000 Contributed Papers 1475, Econometric Society.
  4. Skiba, A K, 1978. "Optimal Growth with a Convex-Concave Production Function," Econometrica, Econometric Society, vol. 46(3), pages 527-39, May.
  5. Fershtman, Chaim & Kamien, Morton I, 1987. "Dynamic Duopolistic Competition with Sticky Prices," Econometrica, Econometric Society, vol. 55(5), pages 1151-64, September.
  6. Wirl, Franz & Feichtinger, Gustav, 2005. "History dependence in concave economies," Journal of Economic Behavior & Organization, Elsevier, vol. 57(4), pages 390-407, August.
  7. Gaudet, Gerard & Salant, Stephen W, 1991. "Increasing the Profits of a Subset of Firms in Oligopoly Models with Strategic Substitutes," American Economic Review, American Economic Association, vol. 81(3), pages 658-65, June.
  8. Dechert, W. Davis & Nishimura, Kazuo, 1983. "A complete characterization of optimal growth paths in an aggregated model with a non-concave production function," Journal of Economic Theory, Elsevier, vol. 31(2), pages 332-354, December.
  9. Dockner, Engelbert J. & Sorger, Gerhard, 1996. "Existence and Properties of Equilibria for a Dynamic Game on Productive Assets," Journal of Economic Theory, Elsevier, vol. 71(1), pages 209-227, October.
  10. Dutta Prajit K. & Sundaram Rangarajan K., 1993. "How Different Can Strategic Models Be?," Journal of Economic Theory, Elsevier, vol. 60(1), pages 42-61, June.
  11. Philip R. Lane & Aaron Tornell, 1999. "The Voracity Effect," American Economic Review, American Economic Association, vol. 89(1), pages 22-46, March.
  12. Benchekroun, Hassan, 2003. "Unilateral production restrictions in a dynamic duopoly," Journal of Economic Theory, Elsevier, vol. 111(2), pages 214-239, August.
  13. Dutta, Prajit K & Sundaram, Rangarajan K, 1993. "The Tragedy of the Commons?," Economic Theory, Springer, vol. 3(3), pages 413-26, July.
  14. Lane, Philip R & Tornell, Aaron, 1996. " Power, Growth, and the Voracity Effect," Journal of Economic Growth, Springer, vol. 1(2), pages 213-41, June.
  15. repec:cup:cbooks:9780521637329 is not listed on IDEAS
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