On nonrenewable resource oligopolies: The asymmetric case
Benchekroun,H. Halsema,A. Withagen,C.A.A.M.
Benchekroun,H.
Halsema,A.
Withagen,C.A.A.M.
Abstract
We give a full characterization of the open-loop Nash equilibrium of a nonrenewable resource game between two types of firms differing in extraction costs. We show that (i) there almost always exists a phase where both types of firms supply simultaneously, (ii) when the high cost mines are exploited by a number of firms that goes to infinity the equilibrium approaches the cartel-versus-fringe equilibrium with the fringe firms acting as price takers, and (iii) the cheaper resource may not be exhausted first, a violation of the Herfindahl rule, that may be detrimental to social welfare.
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Date
2009
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Research Projects
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Citation
Benchekroun, H, Halsema, A & Withagen, C A A M 2009, 'On nonrenewable resource oligopolies : The asymmetric case', Journal of Economic Dynamics & Control, vol. 33, no. 11, pp. 1867-1879.