Resource Mobility and Market Performance

Luca Colombo and Paola Labrecciosa
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Luca Colombo: ESC [Rennes] - ESC Rennes School of Business
Paola Labrecciosa: ESSCA - ESSCA – École supérieure des sciences commerciales d'Angers = ESSCA Business School

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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 extractio

Date: 2023-09-25
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Published in Dynamic Games and Applications, 2023, 14 (1), pp.78-96. ⟨10.1007/s13235-023-00517-8⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-04500068

DOI: 10.1007/s13235-023-00517-8

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