Nonrenewable Resource Oligopolies and the Cartel-Fringe Game

Hassan Benchekroun and Cees Withagen

Cahiers de recherche from Centre interuniversitaire de recherche en économie quantitative, CIREQ

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 (à 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 price-taker, as a limit case of an asymmetric oligopoly where the number of fringe firms tends to inifinity, does not extend to the case where firms can use closed-loop strategies.

Keywords: nonrenewable resources; cartel-fringe; Nash equilibrium; openloop; closed-loop; feedback (search for similar items in EconPapers)
JEL-codes: C61 C73 D43 Q30 (search for similar items in EconPapers)
Pages: 33 pages
Date: 2008
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Working Paper: NONRENEWABLE RESOURCE OLIGOPOLIES AND THE CARTEL-FRINGE GAME (2008)
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Persistent link: https://EconPapers.repec.org/RePEc:mtl:montec:14-2008

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