Citation

Discussion Paper Details

Please find the details for DP1291 in an easy to copy and paste format below:

Full Details   |   Bibliographic Reference

Full Details

Title: International Trade in Exhaustible Resources: A Cartel-Competitive Fringe Model

Author(s): Larry Karp and Olli Tahvonen

Publication Date: January 1996

Keyword(s): Cartel-fringe Model, Dynamic Games, Markov Perfect Equilibrium and Trade in Non-renewable Resources

Programme Area(s): International Trade and Regional Economics

Abstract: We characterize the open-loop and the Markov-Perfect Stackelberg equilibria for a differential game in which a cartel and a fringe extract a non-renewable resource. Both agents have stock dependent costs. The comparison of initial market shares, across different equilibria, depends on which firm has the cost advantage. The cartel's steady-state market share is largest in the open-loop equilibrium and the smallest in the competitive equilibrium. The initial price may be larger in the Markov equilibria (relative to the open-loop equilibrium), so less market power is consistent with an equilibrium that appears less competitive. The benefit to cartelization increases with market share.

For full details and related downloads, please visit: https://cepr.org/active/publications/discussion_papers/dp.php?dpno=1291

Bibliographic Reference

Karp, L and Tahvonen, O. 1996. 'International Trade in Exhaustible Resources: A Cartel-Competitive Fringe Model'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=1291