Note on the Open-Loop von Stackelberg Equilibrium in the Cartel versus Fringe Model

Fons Groot, Cees Withagen and Aart de Zeeuw

Economic Journal, 1992, vol. 102, issue 415, 1478-84

Abstract: One of the ways to model the supply side of the world oil market is by means of the cartel versus fringe model and to employ the open-loop von Stackelberg equilibrium concept. This note shows that the equilibrium as presented in the literature does not satisfy the optimality conditions for the open-loop equilibrium. The authors show, furthermore, that in contrast with the prevailing view, the equilibrium can display discontinuous price trajectories. Copyright 1992 by Royal Economic Society.

Date: 1992
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Working Paper: Note on the open-loop von Stackelberg equilibrium in the cartel versus fringe model (1993)
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