Resource Mobility and Market Performance

Luca Colombo () and Paola Labrecciosa ()
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Luca Colombo: Rennes School of Business
Paola Labrecciosa: ESSCA School of Management (Paris Campus)

Dynamic Games and Applications, 2024, vol. 14, issue 1, No 6, 78-96

Abstract: Abstract We derive a feedback equilibrium of an infinite-horizon dynamic Cournot game where production requires exploitation of a renewable mobile resource, such as migratory fish, wildlife, and groundwater. We study how a small increase in the resource mobility parameter (starting from a position of no resource mobility) impacts on the equilibrium and the associated consumer’s surplus, firms’ profits and social welfare. We show that consumer’s surplus and social welfare increase in the short run but decrease in the long run, while firms’ profits may either increase or decrease in the short run, depending on initial conditions, and increase in the long run. Over the entire planning horizon, both the discounted consumer’s surplus and the discounted social welfare decrease, whereas the discounted profits increase. This result remains valid also in the presence of a per unit tax on extraction.

Keywords: Resource mobility; Spatially connected resources; Social welfare; Differential oligopoly games; Feedback equilibrium (search for similar items in EconPapers)
JEL-codes: C73 D43 L13 Q20 (search for similar items in EconPapers)
Date: 2024
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DOI: 10.1007/s13235-023-00517-8

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