Abstract
We give a full characterization of the open-loop Nash equilibrium of a nonrenewable resource game between two types of firms differing in extraction costs. We show that (i) there almost always exists a phase where both types of firms supply simultaneously, (ii) when the high cost mines are exploited by a number of firms that goes to infinity the equilibrium approaches the cartel-versus-fringe equilibrium with the fringe firms acting as price takers, and (iii) the cheaper resource may not be exhausted first, a violation of the Herfindahl rule, that may be detrimental to social welfare.
Original language | English |
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Pages (from-to) | 1867-1879 |
Journal | Journal of Economic Dynamics & Control |
Volume | 33 |
Issue number | 11 |
Publication status | Published - 2009 |