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On nonrenewable resource oligopolies: The asymmetric case

Hassan Benchekroun (), Alex Halsema and Cees Withagen

Journal of Economic Dynamics and Control, 2009, vol. 33, issue 11, 1867-1879

Abstract: We give a full characterization of the open-loop Nash equilibrium of a nonrenewable resource game between two types of firms differing in extraction costs. We show that (i) there almost always exists a phase where both types of firms supply simultaneously, (ii) when the high cost mines are exploited by a number of firms that goes to infinity the equilibrium approaches the cartel-versus-fringe equilibrium with the fringe firms acting as price takers, and (iii) the cheaper resource may not be exhausted first, a violation of the Herfindahl rule, that may be detrimental to social welfare.

Keywords: Nonrenewable; resources; Nash; equilibrium; Cartel; versus; fringe; Open; loop (search for similar items in EconPapers)
Date: 2009
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Journal of Economic Dynamics and Control is currently edited by J. Bullard, C. Chiarella, H. Dawid, C. H. Hommes, P. Klein and C. Otrok

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Handle: RePEc:eee:dyncon:v:33:y:2009:i:11:p:1867-1879