On von Stackelberg Leadership in a Cartel-Fringe-Renewables' Model of Exhaustible Resource Extraction

Simon Elgersma, Hassan Benchekroun, Gerard Cornelis van der Meijden and Cees A. Withagen

No 12648, CESifo Working Paper Series from CESifo

Abstract: We characterize the time-consistent solution of a cartel-fringe model of exhaustible resource extraction in which the cartel credibly acts as a von Stackelberg leader and renewable and backstop substitutes are available. For every configuration of initial resource stocks, we identify the equilibrium sequence that arises in the feedback von Stackelberg equilibrium (FBSE). We show that the FBSE exhibits three possible equilibrium extraction paths. Two of them start with a phase of simultaneous supply by the cartel and the fringe, whereas the third one starts with a phase in which the cartel is the sole supplier. We then compare the FBSE with the Nash-Cournot equilibrium (CFNE) and the open-loop von Stackelberg equilibrium (OLSE). A key distinction between the FBSE and the OLSE is that the latter never features an initial phase of simultaneous extraction, whereas such a phase emerges in the FBSE for a range of initial stock configurations. An important departure from the CFNE is that the FBSE allows for an initial phase of cartel-only supply, in which the cartel sets the price so as to keep the fringe at bay.

Keywords: cartel-fringe; dynamic game; time-consistency; von Stackelberg equilibrium (search for similar items in EconPapers)
JEL-codes: Q01 Q30 Q38 Q42 (search for similar items in EconPapers)
Date: 2026
New Economics Papers: this item is included in nep-com, nep-env and nep-gth
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