Economic analysis of OPEC using a Markov chain model
The authors say, after citing several conclusions from various economic analyses of OPEC, that either different assumptions are being made about the nature of OPEC and its internal bargaining processes or a different appraisal is being made of the incentives to cartelize and to compete in the world's crude-oil market. The theory of oligopoly or cartel determination of price and quantity does not provide unique results. What is required is a method that enables the observer to make inferences about cartel behavior from observable market data. The authors believe the appropriate technique for this purpose to be a Markov chain or transition-probability model applied to market-share data. After the estimation of transition matrices from observable market shares, the matrices are used in two important ways. First, it is tested whether structural changes in world producer shares occurred immediately after the OPEC period of effective power, and whether structural changes occurred in member shares within OPEC. Then the implications of a stable share arrangement are projected into future time periods. While the transition matrices cannot tell how political relationships within OPEC are managed, significant changes in them can tell when a major political shift has occurred.
- Research Organization:
- Univ. of Illinois, Chicago
- OSTI ID:
- 6702294
- Journal Information:
- J. Energy Dev.; (United States), Vol. 3:2
- Country of Publication:
- United States
- Language:
- English
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Related Subjects
POLICY AND ECONOMY
02 PETROLEUM
OPEC
ECONOMIC ANALYSIS
CARTELS
CHARGES
ENERGY MODELS
EVALUATION
GOVERNMENT POLICIES
MANAGEMENT
MARKET
MARKOV PROCESS
ECONOMICS
INTERNATIONAL ORGANIZATIONS
STOCHASTIC PROCESSES
290200* - Energy Planning & Policy- Economics & Sociology
020700 - Petroleum- Economics
Industrial
& Business Aspects
290100 - Energy Planning & Policy- Energy Analysis & Modeling
294002 - Energy Planning & Policy- Petroleum