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A Global Asymmetric Duopoly Game of Relatively Scarce Resources

Author

Listed:
  • Behnaz Minooei Fard
  • Giovanni Di Bartolomeo
  • Willi Semmler

Abstract

This study analyzes the dynamics of the global rare earth element (REE) market, with a focus on China's dominant role as the primary supplier, which is crucial for the energy transition and digitalization. Using a game-theoretic approach, the research examines a potential duopoly market structure that may emerge over time, as well as potential shifts in supply from China to other countries in this scenario. It considers China’s low marginal costs and factors like resource extraction and discoveries. Additionally, the study examines the strategic market interactions, the role of technological advancements, and policy support in shaping market outcomes. The methodology incorporates the assumption that agents have limited foresight and use a learned value function to strategically assess outcomes based on their own and others' actions while accounting for environmental constraints.

Suggested Citation

  • Behnaz Minooei Fard & Giovanni Di Bartolomeo & Willi Semmler, 2025. "A Global Asymmetric Duopoly Game of Relatively Scarce Resources," Working Papers in Public Economics 260, Department of Economics and Law, Sapienza University of Roma.
    • Handle: RePEc:sap:wpaper:wp260
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    More about this item

    Keywords

    Rare earth elements; Game theory; Duopoly; Known reserves dynamics; Policy support; Relative scarcity; NMPC; Reinforcement learning;
    All these keywords.

    JEL classification:

    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
    • C7 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory
    • Q3 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation

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