Exhaustible resources and cartels: an intertemporal Nash-Cournot model
- Australian National Univ., Canberra
This paper presents an analysis of the effects of the formation of a cartel in an industry extracting an exhaustible resource, where the cartel and competitive fringe have different costs of production. The important result of this paper is that cartelization can cause the rents on the fringe resources to fall, which is contrary to the results obtained if the usual cost assumption is invoked that all firms have identical cost functions. This result is proved for the special case of constant marginal costs, with the cartel enjoying a significant cost advantage. However, the result is more general and can occur even if the cartel enjoys only a slight cost advantage, and may also occur if there are convex rather than linear cost functions. The analysis also reveals that the patterns of production by both the fringe firms and the cartel will be altered by cartelization. 4 figures, 9 references.
- OSTI ID:
- 6866036
- Journal Information:
- Can. J. Econ.; (United States), Journal Name: Can. J. Econ.; (United States) Vol. 13:4; ISSN CJECB
- Country of Publication:
- United States
- Language:
- English
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