Exhaustible resources and market structure in world oil: a Nash-Cournot approach
Most studies in the economic literature suggested the 1974-1978 world oil price structure as nearly compatible with optimum OPEC profits. Since 1978, however, renewed market instability has led to much higher prices. This study deals with the role of the world oil market structure and its implications for long-term equilibrium prices. Various market models are investigated to study the impact of large-scale cartelization and the probable long-term evolution in the event of a cartel breakdown. All results are referenced to the perfectly competitive solution. The theoretical structure of the various imperfect competition models follows the standard Nash-Cournot analysis of oligopolistic markets. The solutions are derived from dynamic optimization problems subject to the constraint of resource exhaustion. The empirical parameterization of the models is a simplified version of intricate realities. In spite of the simplified approach, important insights are gained on the nature of alternative world oil equilibria. The most-significant findings concern the stability of the relative effects of different imperfectly competitive models across parametric cases and the substantial monopoly gains attainable without large-scale cartelization.
- OSTI ID:
- 5130773
- Country of Publication:
- United States
- Language:
- English
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CARTELS
COMPETITION
ECONOMIC ANALYSIS
ECONOMIC IMPACT
ECONOMICS
ENERGY SOURCES
FOSSIL FUELS
FUELS
GLOBAL ASPECTS
MARKET
MONOPOLIES
PETROLEUM
PRICES
RESOURCE DEPLETION