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Fossil Fuel Extraction and Investment in Backstop Technology: A Strategic Interaction (in Persian)

Author

Listed:
  • Esfahani, Hamideh

    (Assistant Professor of Economics, Institute for Management and Planning Studies, Tehran, Iran.)

  • Shahmiri, Shiva

    (M.A. in Socio-Economic System Engineering, Institute for Management and Planning Studies, Tehran, Iran.)

Abstract

In the economy of renewable resources, oil-importing countries seek to explore and develop backstop technologies to moderate their reliance on oil suppliers. On the other hand, oil-exporting countries should integrate the possibility of backstop technology inventions in their decisions regarding oil supply. Therefore oil-exporting countries and oil-importing-countries essentially have a relationship in the form of strategic interdependence. The present study considers a dynamic game between a buyer and a seller, where the seller determines the supply quantity and the buyer can decide to invest in a substitute which is a renewable source that is more favorable for both the buyer and the environment. The results show that in this closed-loop equilibrium, due to the heterogeneity between the fuel supplied by the seller and the alternative fuel developed by the buyer, the time of investing depends on the investment cost and the positive impact of substitute fuel on the environment. Nevertheless, the time of investing is more likely to occur before the resource exhaustion.

Suggested Citation

  • Esfahani, Hamideh & Shahmiri, Shiva, 2020. "Fossil Fuel Extraction and Investment in Backstop Technology: A Strategic Interaction (in Persian)," The Journal of Planning and Budgeting (٠صلنامه برنامه ریزی Ùˆ بودجه), Institute for Management and Planning studies, vol. 25(1), pages 53-69, May.
    • Handle: RePEc:auv:jipbud:v:25:y:2020:i:1:p:53-69
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    More about this item

    Keywords

    Fossil Fuel; Backstop Technology; Strategic Interaction; Dynamic Competition; Closed-loop Equilibrium.;
    All these keywords.

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • O30 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - General
    • Q30 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - General

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