On Price Taking Behavior in a Nonrenewable Resrouce Cartel-Fringe Game

Hassan Benchekroun and Cees Withagen

No 80, OxCarre Working Papers from Oxford Centre for the Analysis of Resource Rich Economies, University of Oxford

Abstract: We consider a nonrenewable resource game with one cartel and a set of fringe members. We show that (i) the outcomes of the closed-loop and the open-loop nonrenewable resource game with the fringe members as price takers (the cartel fringe game à la Salant 1976) coincide and (ii) when the number of fringe firms becomes arbitrarily large, the equilibrium outcome of the closed-loop Nash game does not coincide with the equilibrium outcome of the closed-loop cartel-fringe game. Thus, the outcome of the cartel-fringe open-loop equilibrium can be supported as an outcome of a subgame perfect equilibrium. However the interpretation of the cartel-fringe model, where from the outset the fringe is assumed to be price-taker, as a limit case of an asymmetric oligopoly with the agents playing Nash-Cournot, does not extend to the case where .rms can use closed-loop strategies.

Keywords: cartel-fringe; dominant Â…rm versus fringe; price taking; nonrenewable resources; dynamic games; open-loop versus closed-loop strategies (search for similar items in EconPapers)
JEL-codes: D43 L13 Q30 (search for similar items in EconPapers)
Date: 2011-12-06
New Economics Papers: this item is included in nep-bec, nep-com, nep-env and nep-gth
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Citations: View citations in EconPapers (2)

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Related works:
Journal Article: On price taking behavior in a nonrenewable resource cartel–fringe game (2012)
Working Paper: ON PRICE TAKING BEHAVIOR IN A NONRENEWABLE RESOURCE CARTEL-FRINGE GAME (2010)
Working Paper: On Price Taking Behavior in a Nonrenewable Resource Cartel-Fringe Game (2010)
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