This paper considers a non-renewable resource cartel facing constraints on cooperation. Although different kinds of constraints are conceivable and some of them are also investigated, the analysis focuses on the case in which cooperation is restricted to sufficiently high quotas. This approach of imposing constraints on cartelization complements papers that assume exogenously when a monopoly ends (in particular Benchekroun, H., Gaudet, G., Van Long, N., 2006. Temporary natural resource cartels. Journal of Environmental Economics and Management 52, 663-674) in two aspects: an endogenous determination when the cartel breaks up and the consequence that it is impossible to shift resource sales between the two regimes.
[Show abstract][Hide abstract] ABSTRACT: Most Nash–Cournot oligopoly models of nonrenewable resources apply open-loop equilibrium concepts and are based on physical resource depletion. This paper studies feedback equilibria and economic depletion. Assuming affine-quadratic functional forms, the existence, uniqueness, and explicit solutions for the equilibria are derived for duopoly and n-player oligopoly with multiple resource stocks. For the cases of nonquadratic criteria, we develop a numeric solution scheme for the Nash feedback equilibrium. This scheme is an application of a discrete time, discrete state controlled Markov chain approximation method originally developed for solving deterministic and stochastic dynamic optimization problems. In our Nash–Cournot equilibrium, the degree of concentration in supply declines over time whereas the previous models with physical depletion and open-loop equilibrium concepts predict that a Nash–Cournot resource market will develop in the direction of monopoly supply.
Journal of Economic Dynamics and Control 05/2001; 25(5-25):671-702. DOI:10.1016/S0165-1889(99)00048-2 · 0.86 Impact Factor
[Show abstract][Hide abstract] ABSTRACT: This paper analyzes the market penetration of a competitively produced synfuel, e.g., solar energy, in a market that is initially dominated by a resource extracting monopoly. The availability of the renewable substitute depends not only on the price/cost ratio but also on the installed capacities, which reflect historical investments. As a consequence, the resource monopoly faces a discontinuous residual demand schedule. The dynamic interactions between the resource cartel and the synfuel industry are modelled as a differential game; the (open loop) Nash equilibrium is applied to this game. It will be shown that the commodity price will exceed the production costs of the backstop and that the transition from the periods of resource dependence to the backstop technology will be gradual. Copyright Kluwer Academic Publishers 1991
[Show abstract][Hide abstract] ABSTRACT: This paper analyzes the law and economics of United States v. Microsoft, a landmark case of antitrust intervention in network industries. The United States Department of Justice and 19 States sued Microsoft alleging (i) that it monopolized the market for operating systems of personal computers and took anti-competitive actions to illegally maintain its monopoly; (ii) that it attempted to monopolize the market for Internet browsers because such browsers would create competition for operating systems; (iii) that it bundled its browser (Internet Explorer) with Windows; and that it engaged in a number of other anti-competitive exclusionary arrangements with computer manufacturers, Internet service providers, and content providers attempting to thwart the distribution of Netscape's browser. The District Court Judge found in most points for the plaintiffs and ordered the breakup of Microsoft into two companies, one with all the operating systems software, and one with all other products of the company. The District Court also imposed a number of severe restrictions on the business conduct of Microsoft. We analyze the economic issues related to liability. We also analyze the applicability and effectiveness of the remedies imposed by the District Court and contrast them with other potential remedies.
Journal of Industry Competition and Trade 08/2001; 1(1):7-39. DOI:10.1023/A:1011517724873
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