TY - JOUR
T1 - An oligopoly-fringe non-renewable resource game in the presence of a renewable substitute
AU - Benchekroun, Hassan
AU - van der Meijden, Gerard
AU - Withagen, Cees
PY - 2019/8
Y1 - 2019/8
N2 - In accordance with recent empirical evidence, we model the oil market as an oligopoly facing a fringe as well as competition from renewable resources. Within this framework we fully characterize, i.e., for all vectors of initial resource stocks, the equilibrium extraction paths of the fringe and the oligopolists. We show that (i) the sequence of extraction in equilibrium crucially depends on the oligopolists’ market power, (ii) there always exists a phase of simultaneous supply of the oligopolists and the fringe, (iii) the oligopolists pursue a limit-pricing strategy near the end of the extraction horizon, and (iv) an increase in the reserves of the fringe may lead to a decrease in their initial supply.
AB - In accordance with recent empirical evidence, we model the oil market as an oligopoly facing a fringe as well as competition from renewable resources. Within this framework we fully characterize, i.e., for all vectors of initial resource stocks, the equilibrium extraction paths of the fringe and the oligopolists. We show that (i) the sequence of extraction in equilibrium crucially depends on the oligopolists’ market power, (ii) there always exists a phase of simultaneous supply of the oligopolists and the fringe, (iii) the oligopolists pursue a limit-pricing strategy near the end of the extraction horizon, and (iv) an increase in the reserves of the fringe may lead to a decrease in their initial supply.
KW - Limit pricing
KW - Non-renewable resource
KW - Oligopoly-fringe
KW - Renewable substitute
UR - http://www.scopus.com/inward/record.url?scp=85067198729&partnerID=8YFLogxK
UR - http://www.scopus.com/inward/citedby.url?scp=85067198729&partnerID=8YFLogxK
U2 - 10.1016/j.jedc.2019.05.014
DO - 10.1016/j.jedc.2019.05.014
M3 - Article
AN - SCOPUS:85067198729
SN - 0165-1889
VL - 105
SP - 1
EP - 20
JO - Journal of Economic Dynamics and Control
JF - Journal of Economic Dynamics and Control
ER -