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

Technical Report · Thu Apr 01 00:00:00 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
• Resource Relation: Other Information: Prepared in cooperation with Alfred P. Sloan School of Management, Cambridge, Mass
• Country of Publication: United States
• Language: English

Related Subjects

29 ENERGY PLANNING
POLICY AND ECONOMY
02 PETROLEUM
OPEC
CHARGES
PETROLEUM
RESOURCES
ECONOMICS
FINANCIAL INCENTIVES
GAME THEORY
OPTIMIZATION
ENERGY SOURCES
FOSSIL FUELS
FUELS
INTERNATIONAL ORGANIZATIONS
MATHEMATICS
STATISTICS
294002* - Energy Planning & Policy- Petroleum
290200 - Energy Planning & Policy- Economics & Sociology
290400 - Energy Planning & Policy- Energy Resources
020700 - Petroleum- Economics
Industrial
& Business Aspects