Exploration and exhaustibility in dynamic Cournot games

Ludkovski, Michael; Sircar, Ronnie

doi:10.1017/s0956792511000428

Cited by 28 publications

(15 citation statements)

References 20 publications

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“…In that context, a key idea is that of exhaustibility-the running out of reserves because the underlying resource is non-replenishable. Exhaustibility adds shadow costs to extraction and introduces a different mechanism for dynamic market structure-see Harris et al [2010], Ludkovski and Sircar [2011], Ledvina and Sircar [2012]. Combining exhaustibility and R&D (which would provide insights into the empirical cycles of energy exploration and production) requires introduction of an additional state variable (X t ) for reserves and will be dealt with in a separate work.…”

Section: Discussionmentioning

confidence: 99%

Technology ladders and R&D in dynamic Cournot markets

Ludkovski

Sircar

2016

Journal of Economic Dynamics and Control

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Motivated by dramatic and unpredictable technological advances in energy production (for instance drilling and extraction of shale oil), we extend Cournot models of competition to incorporate research and development (R&D) that can lead to (stochastic) drops in production costs. Our model combines features of patent racing with dynamic market structure, capturing the interplay between the immediate competition in terms of production rates and the long-term competition in R&D. The resulting Markov Nash equilibrium is found from a sequence of onestep static games arising between R&D successes, and several numerical examples and extensive analysis of the emerging comparative statics are presented. Analyzing the relationship between current market dominance and the level of R&D investments, we find that market leaders tend to invest more, which in some sense makes oligopoly dynamically unstable. We show that anticipated market transitions have long-term impact; for example the potential of future monopoly can spur R&D investment now, even if the firm is presently uncompetitive and not actively producing. We also show that, surprisingly, random innovations have an ambiguous effect on R&D. This feature, which is driven by the Cournot framework, contrasts with the common situation whereby uncertainty lowers innovation and delays R&D investments. Finally, we demonstrate that increased competition may actually increase efforts to innovate through higher desire to achieve dominance. This would match the anecdotal evidence that the threat of market entrants forces incumbents to maintain high R&D.

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Section: Discussionmentioning

confidence: 99%

Technology ladders and R&D in dynamic Cournot markets

Ludkovski

Sircar

2016

Journal of Economic Dynamics and Control

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“…Others have considered the renewable resources, and a summary by Kerry Smith (2009) shows that no one is really addressing long-term implications. Others (e.g., Harris et al 2010;Ludkovski and Sircar 2011) have applied Game Theory to the problem but have sought to resolves only the problem of price and production levels or the attractiveness of substitutes. It seems therefore that planetary exhaustion has not been researched.…”

Section: • Exhaustion Studiesmentioning

confidence: 99%

Resource Depletion

Seifi¹

2020

The Palgrave Handbook of Corporate Social Responsibility

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This chapter considers the mineral resources of the planet and their present and future availability. It states that they are finite in quantity and once extracted are not available for future use. So all that is available for the future is what remains plus what can be recycled and reused. Sustainability of course depends upon the availability of these mineralsor acceptable substitutes. Thus actions in the present determine future possibilities in a significant way which is not yet being realized, and this chapter considers the implications.

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“…There has been recent work on games of intensity control. For instance, Ludkovski and Sircar (2012) consider the effects of stochastic resource exploration in dynamic Cournot game, where an exhaustible producer and a green producer set the production to affect the price. Gallego and Hu (2014) study dynamic pricing in an oligopolistic market.…”

Section: Related Literaturementioning

confidence: 99%

A Mean Field Games Model for Cryptocurrency Mining

Li¹,

Reppen²,

Sircar³

2019

Preprint

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We propose a mean field game model to study the question of how centralization of reward and computational power occur in the Bitcoin-like cryptocurrencies. Miners compete against each other for mining rewards by increasing their computational power. This leads to a novel mean field game of jump intensity control, which we solve explicitly for miners maximizing exponential utility, and handle numerically in the case of miners with power utilities. We show that the heterogeneity of their initial wealth distribution leads to greater imbalance of the reward distribution, or a "rich get richer" effect. This concentration phenomenon is aggravated by a higher bitcoin price, and reduced by competition. Additionally, an advanced miner with cost advantages such as access to cheaper electricity, contributes a significant amount of computational power in equilibrium. Hence, cost efficiency can also result in the type of centralization seen among miners of cryptocurrencies.

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Exploration and exhaustibility in dynamic Cournot games

Cited by 28 publications

References 20 publications

Technology ladders and R&D in dynamic Cournot markets

Technology ladders and R&D in dynamic Cournot markets

Resource Depletion

A Mean Field Games Model for Cryptocurrency Mining

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