NONRENEWABLE RESOURCE OLIGOPOLIES AND THE CARTEL-FRINGE GAME

Hassan Benchekroun and Cees Withagen

Departmental Working Papers from McGill University, Department of Economics

Abstract: We specify and solve a closed-loop dominant firm nonrenewable resource game, with a price-taking fringe. We show that (i) the outcomes of the closed-loop and the open-loop dominant firm nonrenewable resource game (a la Salant 1976) coincide and (ii) when the number of fringe firms becomes arbitrarily large, the equilibrium outcome of the closed-loop oligopoly game does not coincide with the equilibrium outcome of the closed-loop dominant firm nonrenewable resource game. Thus, the interpretation of the dominant firm model, where the fringe is assumed from the outset to be the price-taker, as a limit case of an asymmetric oligopoly where the number of fringe firms tends to infinity, does not extend to the case where firms can use closed-loop strategies.

JEL-codes: C61 C73 D43 Q30 (search for similar items in EconPapers)
Pages: 30 pages
Date: 2008-01
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http://www.mcgill.ca/files/economics/nonrenewableresourceoligopoiles.pdf (application/pdf)

Related works:
Journal Article: On price taking behavior in a nonrenewable resource cartel–fringe game (2012)
Working Paper: Nonrenewable Resource Oligopolies and the Cartel-Fringe Game (2008)
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Persistent link: https://EconPapers.repec.org/RePEc:mcl:mclwop:2008-02

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