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On the Multiplicity of Equilibrium Strategies in a Non-Renewable Natural Resource Duopoly

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Listed:
  • Rémi Morin-Chassé
  • Markus Herrmann

Abstract

We identify two possible equilibrium configurations for a non-renewable resource duopoly in a discrete-time framework. For the purpose of illustration, we suppose initial endowments of firms that allow for a maximum of two extraction periods. In the first possible equilibrium, the duopoly exists for two periods, while in the second possible equilibrium, the duopoly lasts only for one period and the firm with the higher initial endowment becomes a monopolist in the second and last period. As neither equilibrium configuration dominates the other for both firms at the same time, it is unclear whether firms acting simultaneously can coordinate on one particular configuration.

Suggested Citation

  • Rémi Morin-Chassé & Markus Herrmann, 2014. "On the Multiplicity of Equilibrium Strategies in a Non-Renewable Natural Resource Duopoly," Cahiers de recherche CREATE 2014-6, CREATE.
    • Handle: RePEc:lvl:creacr:2014-6
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    File URL: https://www.create.ulaval.ca/sites/create.ulaval.ca/files/Publications/create2014-6.pdf
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    References listed on IDEAS

    as
    1. Gérard Gaudet, 2007. "Natural resource economics under the rule of Hotelling," Canadian Journal of Economics, Canadian Economics Association, vol. 40(4), pages 1033-1059, November.
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    3. Salant, Stephen W, 1976. "Exhaustible Resources and Industrial Structure: A Nash-Cournot Approach to the World Oil Market," Journal of Political Economy, University of Chicago Press, vol. 84(5), pages 1079-1093, October.
    4. Salo, Seppo & Tahvonen, Olli, 2001. "Oligopoly equilibria in nonrenewable resource markets," Journal of Economic Dynamics and Control, Elsevier, vol. 25(5), pages 671-702, May.
    5. Dockner,Engelbert J. & Jorgensen,Steffen & Long,Ngo Van & Sorger,Gerhard, 2000. "Differential Games in Economics and Management Science," Cambridge Books, Cambridge University Press, number 9780521637329, October.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Open-loop equilibrium; closed-loop equilibrium; duopoly; non-renewable resource;
    All these keywords.

    JEL classification:

    • Q30 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - General
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection

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