A Global Asymmetric Duopoly Game of Relatively Scarce Resources

Behnaz Minooei Fard, Giovanni Di Bartolomeo and Willi Semmler

No 260, Working Papers in Public Economics from Department of Economics and Law, Sapienza University of Roma

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.

Keywords: Rare earth elements; Game theory; Duopoly; Known reserves dynamics; Policy support; Relative scarcity; NMPC; Reinforcement learning (search for similar items in EconPapers)
JEL-codes: C61 C7 Q3 (search for similar items in EconPapers)
Pages: 32
Date: 2025-04
New Economics Papers: this item is included in nep-ene and nep-gth
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