Pricing policies for a two-part exhaustible resource cartel: the case of OPEC (world oil project). Working paper

Technical Report · Thu Apr 01 04:00:00 EST 1976

OSTI ID:7105035

Hnyilicza, E; Pindyck, R S

This paper examines pricing policies for OPEC under the assumption that the cartel is composed of a block of spender countries with large cash needs and a block of saver countries with little immediate need for cash and a lower rate of discount. The decision problem for the two-part cartel is embodied in a game-theoretic framework and the optimal bargaining solution is computed using results from the theory of cooperative games developed by Nash. The set of feasible bargaining points--and the corresponding Nash solution--is computed under two assumptions on the behavior of output shares: that they are subject to choice and that they are fixed at historical values. The results suggest that for fixed output shares, there is little room for bargaining and the price path approximates the optimal monopoly price path. If the shares are subject to control, optimal paths depend significantly on the relative bargaining power of each block.

• Research Organization: Massachusetts Inst. of Tech., Cambridge (USA). Energy Lab.
• OSTI ID: 7105035
• Report Number(s): PB-264530; MIT-EL-76-08WP
• Country of Publication: United States
• Language: English

Related Subjects

02 PETROLEUM
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294002* -- Energy Planning & Policy-- Petroleum
CHARGES
ECONOMICS
ENERGY SOURCES
FINANCIAL INCENTIVES
FOSSIL FUELS
FUELS
GAME THEORY
INTERNATIONAL ORGANIZATIONS
MATHEMATICS
OPEC
OPTIMIZATION
PETROLEUM
RESOURCES
STATISTICS