Forward Trading in Exhaustible-Resource Oligopoly

Juan-Pablo Montero and Matti Liski (matti.liski@aalto.fi)

No 341, Documentos de Trabajo from Instituto de Economia. Pontificia Universidad Católica de Chile.

Abstract: We analyze oligopolistic exhaustible-resource depletion when firms can trade forward contracts on deliveries, a market structure prevalent in many resource commodity markets. We find that this organization of trade has substantial implications for resource depletion. As firms’ interactions become infinitely frequent, resource stocks become fully contracted and the symmetric oligopolistic equilibrium converges to the perfectly competitive Hotelling (1931) outcome. Asymmetries in stock holdings allow firms to partially escape the procompetitive effect of contracting: a large stock provides commitment to leave a fraction of the stock uncontracted. In contrast, a small stock provides commitment to sell early, during the most profitable part of the equilibrium.

Keywords: Forward trading; exhaustible resources; oligopoly pricing (search for similar items in EconPapers)
JEL-codes: G13 L13 Q30 (search for similar items in EconPapers)
Date: 2008
New Economics Papers: this item is included in nep-env and nep-mic
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Related works:
Journal Article: Forward trading in exhaustible-resource oligopoly (2014)
Working Paper: Forward Trading in Exhaustible-Resource Oligopoly (2008)
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Persistent link: https://EconPapers.repec.org/RePEc:ioe:doctra:341

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