OPEC Production: The Missing Link

James M. Griffin and Lawrence M. Vielhaber

The Energy Journal, 1994, vol. 15, issue 1_suppl, 115-132

Abstract: The future of oil depends critically on the production decisions of OPEC, which in turn depend on a variety of factors internal and external to the cartel. This paper uses a simulation of the world oil market to compute the payoff to OPEC members of alternative price and production profiles, focusing on the incentives to cooperate as well as to cheat. A “tit-for-tat†strategy by the Saudis significantly reduces the incentives to cheat, but the payoff for cheating is still positive for the smaller OPEC producers. Accordingly, prices well below the cartel's joint profit maximizing level seem most likely.

Keywords: Oil production; OPEC; oil prices (search for similar items in EconPapers)
Date: 1994
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Persistent link: https://EconPapers.repec.org/RePEc:sae:enejou:v:15:y:1994:i:1_suppl:p:115-132

DOI: 10.5547/ISSN0195-6574-EJ-Vol15-NoSI-7

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