Anti-Conservationist Effects of the Conservationist Oil Cartel

Andrey Vavilov () and Georgy Trofimov ()
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Andrey Vavilov: Institute for Financial Studies
Georgy Trofimov: Institute for Financial Studies

Chapter Chapter 11 in Natural Resource Pricing and Rents, 2021, pp 289-314 from Springer

Abstract: Abstract A resource monopoly behaves as a “conservationist” in models of exhaustible resources. It extracts less today and keeps more resource under the ground than the competitive market does. In this chapter, we consider a model of economically recoverable resources and show that, in the presence of a high-cost competitive fringe, the cartel’s “conservationism” turns into a too early and too intensive resource extraction by the fringe. The “anti-conservationism” of the equilibrium extraction path selected by the fringe proves to be a robust property of the model. As a result, the cartel acts as if it was a strategic player planning its long-term moves to accelerate the depletion of competitors’ resources and to aggravate their competitive disadvantages.

Date: 2021
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Persistent link: https://EconPapers.repec.org/RePEc:spr:conchp:978-3-030-76753-2_11

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DOI: 10.1007/978-3-030-76753-2_11

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