The Extraction Rate of an Exhaustible Resource in an Oligopolistic Market

Abstract

Most papers analyzing optimal price or extraction paths of a nonrenewable resource are related to competitive or monopolistic markets. In comparison of the extraction paths of these two market-forms the monopolist takes a more conservationist policy [see e.g. Stiglitz], i.e. the total amount of the resource will be depleted slower than in a competitive market. The reason why seems to be intuitively clear: In competitive markets each supplier, who wants to increase his market share by decreasing his price will cause the others to decrease their prices too, if the resource is treated as a homogeneous good. Yet decreasing prices will possibly retard or stop the development of substitutes or technical progress in production. Hence an even faster depletion of the resource stock will take place.KeywordsNash EquilibriumDifferential GameOptimal PriceTopological DegreeResource StockThese keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.