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Short Run Effects of Bleaker Prospects for Oligopolistic Producers of a Non-Renewable Resource

Kristine Grimsrud, Knut Einar Rosendahl (), Halvor Briseid Storrøsten and Marina Tsygankova

No 4579, CESifo Working Paper Series from CESifo

Abstract: In a non-renewable resource market with imperfect competition, both the resource rent and current prices influence a large resource owner’s optimal supply. New information regarding future market conditions that affect the resource rent will consequently impact current supply. Bleaker demand prospects tend to accelerate resource extraction. A more pessimistic outlook for future demand may, however, slow down the early resource extraction of producers with sufficiently large resource stocks and thus more limited resource rent, because the supply from these producers is driven more by current market considerations than by changes in the resource rent. As producers with relatively smaller resource stocks accelerate their supply in response to bleaker demand prospects, producers with sufficiently large resource stocks will reduce their current supply. A numerical model of the European gas market illustrates that the effect of the shale gas revolution is an accelerated supply by most gas producers, but a reduced supply by Russia who loses market shares even before the additional gas enters the market.

Keywords: resource extraction; Cournot competition; European gas market (search for similar items in EconPapers)
JEL-codes: Q31 Q33 Q42 (search for similar items in EconPapers)
Date: 2014
New Economics Papers: this item is included in nep-cis, nep-com, nep-ene and nep-env
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Related works:
Journal Article: Short Run Effects of Bleaker Prospects for Oligopolistic Producers of a Non-renewable Resource (2016) Downloads
Working Paper: Short run effects of bleaker prospects for oligopolistic producers of a non-renewable resource (2013) Downloads
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