Non-renewable resource Stackelberg games

Rui Wan and John R. Boyce

Resource and Energy Economics, 2014, vol. 37, issue C, 102-121

Abstract: The market structure for many mineral industries can be described as oligopoly with potential for Stackelberg leadership. This paper derives and analyzes dynamically consistent extraction equilibria in a two-period discrete-time “Truly” Stackelberg (TS) model of non-renewable resource extraction, where firms move sequentially within each period and where both the leader and follower have market power. We show how the leader may be able to manipulate extraction patterns by exploiting resource constraints. Whether the leader wants to speed up its own production relative to the Cournot–Nash (CN) equilibrium depends on the shape of its iso-profit curve, which is affected by the two firms’ relative stock endowments and relative production costs. If the leader extracts faster, then the follower extracts slower, but in aggregate the industry extracts faster. Unlike static Stackelberg games, the follower does not necessarily have a second mover disadvantage.

Keywords: Non-renewable resources; Stackelberg; Cournot–Nash; Dominant-firm/competitive-fringe (search for similar items in EconPapers)
JEL-codes: D43 Q3 (search for similar items in EconPapers)
Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (14)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:resene:v:37:y:2014:i:c:p:102-121

DOI: 10.1016/j.reseneeco.2013.11.012

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