Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
5098966 | Journal of Economic Dynamics and Control | 2009 | 13 Pages |
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.
Related Topics
Physical Sciences and Engineering
Mathematics
Control and Optimization
Authors
Hassan Benchekroun, Alex Halsema, Cees Withagen,