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ON PRICE TAKING BEHAVIOR IN A NONRENEWABLE RESOURCE CARTEL-FRINGE GAME

Hassan Benchekroun () and Cees Withagen

Departmental Working Papers from McGill University, Department of Economics

Abstract: We consider a nonrenewable resource game with one cartel and a set of fringe members. We show that (i) the outcomes of the closed-loop and the open-loop nonrenewable resource game with the fringe members as price takers (the cartel-fringe game a la Salant 1976) coincide and (ii) when the number of fringe firms becomes arbitrarily large, the equilibrium outcome of the closed-loop Nash game does not coincide with the equilibrium outcome of the closed-loop cartel-fringe game. Thus, the outcome of the cartel-fringe open-loop equilibrium can be supported as an outcome of a subgame perfect equilibrium. However the interpretation of the cartel-fringe model, where from the outset the fringe is assumed to be price taker, as a limit case of an asymmetric oligopoly with the agents playing Nash-Cournot, does not extend to the case where firms can use closed-loop strategies.

JEL-codes: D43 Q30 L13 (search for similar items in EconPapers)
Pages: 35 pages
Date: 2010-03
New Economics Papers: this item is included in nep-com, nep-ene and nep-mic
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Related works:
Journal Article: On price taking behavior in a nonrenewable resource cartel–fringe game (2012) Downloads
Working Paper: On Price Taking Behavior in a Nonrenewable Resrouce Cartel-Fringe Game (2011) Downloads
Working Paper: On Price Taking Behavior in a Nonrenewable Resource Cartel-Fringe Game (2010) Downloads
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