Forward trading in exhaustible-resource oligopoly

Matti Liski () and Juan-Pablo Montero

Resource and Energy Economics, 2014, vol. 37, issue C, 122-146

Abstract: We analyze oligopolistic exhaustible-resource depletion when firms can trade forward contracts on deliveries – a market structure relevant for some resource markets (e.g., storable pollution permits, hydro-based power pools) – and find that trading forwards can have substantial implications for resource depletion. We show that when firms’ initial resource-stocks are the same, the subgame-perfect equilibrium path approaches the perfectly competitive path as firms trade forwards frequently. But when the initial stocks differ, firms can credibly escape part of the competitive pressure of forward contracting. It is a unique feature of the resource model that equilibrium contracting and the degree of competition depends on resource endowments.

Keywords: Exhaustible resources; Oligopoly; Forward contracting (search for similar items in EconPapers)
JEL-codes: G13 L13 Q30 (search for similar items in EconPapers)
Date: 2014
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Citations: View citations in EconPapers (5)

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Related works:
Working Paper: Forward Trading in Exhaustible-Resource Oligopoly (2008)
Working Paper: Forward Trading in Exhaustible-Resource Oligopoly (2008)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:resene:v:37:y:2014:i:c:p:122-146

DOI: 10.1016/j.reseneeco.2013.12.002

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