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Consumer surplus-enhancing cooperation in a natural resource oligopoly

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  • Colombo, Luca
  • Labrecciosa, Paola

Abstract

In this study, we use a differential game to illustrate that cooperation among oligopolists selling a common-pool renewable resource may lead not only to higher industrial output, consumer surplus, and resource stock in the stationary equilibrium, but also a greater discounted sum of consumer surplus. A priori, this finding is not straightforward; an increase in the coefficient of cooperation causes industry output to first decrease and then increase over time, thus making consumers worse off in the short run and better off in the long run. This study establishes the conditions under which the long-run effects outweigh the short-run effects of cooperation, leading to an increase in the discounted sum of consumer surplus. Our analysis suggests that, in some cases, “conservation cartels” should be promoted on the basis of not only resource conservation but also efficiency.

Suggested Citation

  • Colombo, Luca & Labrecciosa, Paola, 2018. "Consumer surplus-enhancing cooperation in a natural resource oligopoly," Journal of Environmental Economics and Management, Elsevier, vol. 92(C), pages 185-193.
    • Handle: RePEc:eee:jeeman:v:92:y:2018:i:c:p:185-193
    DOI: 10.1016/j.jeem.2018.08.015
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    Cited by:

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    2. Benchekroun, Hassan & Ray Chaudhuri, Amrita & Tasneem, Dina, 2020. "On the impact of trade in a common property renewable resource oligopoly," Journal of Environmental Economics and Management, Elsevier, vol. 101(C).
    3. Colombo, Luca & Labrecciosa, Paola & Van Long, Ngo, 2022. "A dynamic analysis of international environmental agreements under partial cooperation," European Economic Review, Elsevier, vol. 143(C).
    4. Van Moer, Geert, 2022. "Horizontal agreements about the use of a natural resource," MPRA Paper 113878, University Library of Munich, Germany.
    5. N. M. Rozanova, 2021. "Methodological Issues of Modern Competition Policy," Studies on Russian Economic Development, Springer, vol. 32(5), pages 492-498, September.
    6. Benchekroun, Hassan & Ray Chaudhuri, Amrita & Tasneem, Dina, 2020. "On the impact of trade in a common property renewable resource oligopoly," Journal of Environmental Economics and Management, Elsevier, vol. 101(C).
    7. Eric Innocenti & Corinne Idda & Dominique Prunetti & Pierre-Régis Gonsolin, 2022. "Agent-based modelling of a small-scale fishery in Corsica," Post-Print hal-03886619, HAL.
    8. Mai, Nhat Chi, 2022. "Behavioural Economics Assignment: Business Consumer Decision-Making & Consumer Surplus," OSF Preprints 4jrc8, Center for Open Science.
    9. Colombo, Luca & Labrecciosa, Paola, 2022. "Product quality differentiation in a renewable resource oligopoly," Journal of Environmental Economics and Management, Elsevier, vol. 111(C).
    10. Dai, Miao & Benchekroun, Hassan & Long, Ngo Van, 2022. "On the profitability of cross-ownership in Cournot nonrenewable resource oligopolies: Stock size matters," Journal of Environmental Economics and Management, Elsevier, vol. 111(C).
    11. Breton, Michèle & Sbragia, Lucia, 2023. "Self-image and the stability of international environmental agreements," Ecological Economics, Elsevier, vol. 211(C).

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    More about this item

    Keywords

    Renewable resources; Differential games; Coefficient of cooperation; Market efficiency; Productive asset oligopoly;
    All these keywords.

    JEL classification:

    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • Q20 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - General

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