Pricing Policies of an Oil Cartel with Expectation of Substitute Producers

Majid Ahmadian

The Energy Journal, 1988, vol. 9, issue 1, 115-120

Abstract: The proposition that the net price in a competitive market and the net marginal revenue in a monopolistic market rise at the rate of interest was first demonstrated by Hotelling (1931) for a non-durable exhaustible resource. However, Levhari and Liviatan (1977) and Fisher (1981) have shown that Hotelling's r-percent rule is not valid when extraction costs rise with cumulative production. This r-percent rule also applies to a perfectly durable resource when the resource is produced in a competitive market. It does not apply in the case of a monopolistic market.

Keywords: Oil cartel; Pricing policy; Hotelling; Monopolistic market; Competition (search for similar items in EconPapers)
Date: 1988
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Persistent link: https://EconPapers.repec.org/RePEc:sae:enejou:v:9:y:1988:i:1:p:115-120

DOI: 10.5547/ISSN0195-6574-EJ-Vol9-No1-10

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