Theory of oiligopoly: Cournot equilibrium in exhaustible resource markets with fixed supplies
Assuming Cournot behavior in open loop strategies by the several sellers, an imperfectly competitive market for an exhaustible resource is studied. An equilibrium develops with the following properties: industry production declines over time, as does the present value of market price net of unit extraction cost. The degree of concentration in supply increases over time, tending toward monopoly. Larger firms earn a lower rate of return on their endowment, and perceive a smaller increment to profits from the acquisition of new stocks. Industry prices and supply paths are insensitive to a local redistribution of endowments. The relative deadweight burden of oiligopoly is small for plausible values of market parameters. 14 references.
- OSTI ID:
- 6194293
- Country of Publication:
- United States
- Language:
- English
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