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On price taking behavior in a nonrenewable resource cartel–fringe game

Hassan Benchekroun () and Cees Withagen

Games and Economic Behavior, 2012, vol. 76, issue 2, 355-374

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 firms can use closed-loop strategies.

Keywords: Cartel–fringe; Dominant firm versus fringe; Price taking; Nonrenewable resources; Dynamic games; Open-loop versus closed-loop strategies (search for similar items in EconPapers)
JEL-codes: D43 Q30 L13 (search for similar items in EconPapers)
Date: 2012
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Related works:
Working Paper: On Price Taking Behaviour in a Non-renewable Resource Cartel-Fringe Game (2012) Downloads
Working Paper: ON PRICE TAKING BEHAVIOR IN A NONRENEWABLE RESOURCE CARTEL-FRINGE GAME (2010) Downloads
Working Paper: On Price Taking Behavior in a Nonrenewable Resource Cartel-Fringe Game (2010) Downloads
Working Paper: NONRENEWABLE RESOURCE OLIGOPOLIES AND THE CARTEL-FRINGE GAME (2008) Downloads
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