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Nonrenewable Resource Oligopolies And The Cartel-Fringe Game

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  • Hassan Benchekroun
  • Cees Withagen

Abstract

We specify and solve a closed-loop dominant firm nonrenewable resource game, with a price-taking fringe. We show that (i) the outcomes of the closed-loop and the open-loop dominant firm nonrenewable resource game (a la Salant 1976) coincide and (ii) when the number of fringe firms becomes arbitrarily large, the equilibrium outcome of the closed-loop oligopoly game does not coincide with the equilibrium outcome of the closed-loop dominant firm nonrenewable resource game. Thus, the interpretation of the dominant firm model, where the fringe is assumed from the outset to be the price-taker, as a limit case of an asymmetric oligopoly where the number of fringe firms tends to infinity, does not extend to the case where firms can use closed-loop strategies.

Suggested Citation

  • Hassan Benchekroun & Cees Withagen, 2008. "Nonrenewable Resource Oligopolies And The Cartel-Fringe Game," Departmental Working Papers 2008-02, McGill University, Department of Economics.
  • Handle: RePEc:mcl:mclwop:2008-02
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    Cited by:

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    2. Wan, Rui & Boyce, John R., 2014. "Non-renewable resource Stackelberg games," Resource and Energy Economics, Elsevier, vol. 37(C), pages 102-121.
    3. Kristine Grimsrud & Knut Einar Rosendahl & Halvor B. Storrøsten & Marina Tsygankova, 2016. "Short Run Effects of Bleaker Prospects for Oligopolistic Producers of a Non-renewable Resource," The Energy Journal, , vol. 37(3), pages 293-314, July.
    4. 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.
    5. Katarzyna Kańska & Agnieszka Wiszniewska-Matyszkiel, 2022. "Dynamic Stackelberg duopoly with sticky prices and a myopic follower," Operational Research, Springer, vol. 22(4), pages 4221-4252, September.
    6. Hassan Benchekroun & Gerard C. van der Meijden & Cees A. Withagen, 2017. "OPEC, Shale Oil, and Global Warming - On the Importance of the Order of Extraction," CESifo Working Paper Series 6746, CESifo.
    7. Benchekroun, Hassan & van der Meijden, Gerard & Withagen, Cees, 2020. "OPEC, unconventional oil and climate change - On the importance of the order of extraction," Journal of Environmental Economics and Management, Elsevier, vol. 104(C).
    8. Kicsiny, R. & Varga, Z. & Scarelli, A., 2014. "Backward induction algorithm for a class of closed-loop Stackelberg games," European Journal of Operational Research, Elsevier, vol. 237(3), pages 1021-1036.
    9. Gerard Meijden & Cees Withagen & Hassan Benchekroun, 2022. "An Oligopoly-Fringe Model with HARA Preferences," Dynamic Games and Applications, Springer, vol. 12(3), pages 954-976, September.
    10. Benchekroun, Hassan & van der Meijden, Gerard & Withagen, Cees, 2019. "An oligopoly-fringe non-renewable resource game in the presence of a renewable substitute," Journal of Economic Dynamics and Control, Elsevier, vol. 105(C), pages 1-20.
    11. van der Meijden, Gerard & Benchekroun, Hassan & van der Ploeg, Frederick & Withagen, Cees, 2023. "Do strong oligopolies reverse Green Paradox effects?," European Journal of Political Economy, Elsevier, vol. 79(C).
    12. Roos, Nicolas de & Smirnov, Vladimir, 2021. "Collusion, price dispersion, and fringe competition," European Economic Review, Elsevier, vol. 132(C).
    13. Huang, Weihong & Zhang, Yang, 2018. "Technological gap and heterogeneous oligopoly," The Quarterly Review of Economics and Finance, Elsevier, vol. 67(C), pages 1-7.

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    More about this item

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • Q30 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - General
    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis

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