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Pricing Policies of an Oil Cartel with Expectation of Substitute Producers

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  • Majid Ahmadian

Abstract

The proposition that the net price in a competitive market and the net marginal revenue in a monopolistic market rise at the rate of interest was first demonstrated by Hotelling (1931) for a non-durable exhaustible resource. However, Levhari and Liviatan (1977) and Fisher (1981) have shown that Hotelling's r-percent rule is not valid when extraction costs rise with cumulative production. This r-percent rule also applies to a perfectly durable resource when the resource is produced in a competitive market. It does not apply in the case of a monopolistic market.

Suggested Citation

  • Majid Ahmadian, 1988. "Pricing Policies of an Oil Cartel with Expectation of Substitute Producers," The Energy Journal, , vol. 9(1), pages 115-120, January.
    • Handle: RePEc:sae:enejou:v:9:y:1988:i:1:p:115-120
    DOI: 10.5547/ISSN0195-6574-EJ-Vol9-No1-10
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