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Price versus Quantity Rules in Dynamic Competition: The Case of Nonrenewable Natural Resources

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  • Gaudet, Gerard
  • Moreaux, Michel

Abstract

Price and quantity competition are compared in the dynamic game framework of a nonrenewable natural resource duopoly. It is shown that a price-decision-rule (quantity-decision-rule) strategy dominates, in terms of a higher present value of the initial resource stocks, if the resources are complements (substitutes). This result is shown to hold for subgame-perfect equilibria. It holds although equilibrium price paths resulting from those two types of strategies will cross. It is shown, however, that even though the price trajectories cross, initial equilibrium prices resulting from the price-rule strategy will be lower than the initial equilibrium prices resulting from the quantity-rule strategy. Copyright 1990 by Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association.

Suggested Citation

  • Gaudet, Gerard & Moreaux, Michel, 1990. "Price versus Quantity Rules in Dynamic Competition: The Case of Nonrenewable Natural Resources," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 31(3), pages 639-650, August.
    • Handle: RePEc:ier:iecrev:v:31:y:1990:i:3:p:639-50
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    Cited by:

    1. Joris Morbee & Stef Proost, 2010. "Russian Gas Imports in Europe: How Does Gazprom Reliability Change the Game?," The Energy Journal, International Association for Energy Economics, vol. 0(Number 4), pages 79-110.
    2. Beard, Rodney, 2008. "A dynamic model of renewable resource harvesting with Bertrand competition," MPRA Paper 8916, University Library of Munich, Germany.
    3. Colombo, Luca & Labrecciosa, Paola, 2015. "On the Markovian efficiency of Bertrand and Cournot equilibria," Journal of Economic Theory, Elsevier, vol. 155(C), pages 332-358.
    4. Colombo, Luca & Labrecciosa, Paola, 2022. "Product quality differentiation in a renewable resource oligopoly," Journal of Environmental Economics and Management, Elsevier, vol. 111(C).

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