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 L13 Q30 (search for similar items in EconPapers)
Date: 2012
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (14)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0899825612000929
Full text for ScienceDirect subscribers only

Related works:
Working Paper: On Price Taking Behavior in a Nonrenewable Resrouce Cartel-Fringe Game (2011)
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)
Working Paper: NONRENEWABLE RESOURCE OLIGOPOLIES AND THE CARTEL-FRINGE GAME (2008)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:gamebe:v:76:y:2012:i:2:p:355-374

DOI: 10.1016/j.geb.2012.06.008

Access Statistics for this article

Games and Economic Behavior is currently edited by E. Kalai

More articles in Games and Economic Behavior from Elsevier
Bibliographic data for series maintained by Catherine Liu ().