The quadratic oil extraction oligopoly

Abstract

Each extractor has a distinct quadratic extraction cost and faces a linear industry demand schedule. We observe that the open loop and closed loop solutions are the same if initial stocks are such that each competitor is extracting in every period in which her competitors are extracting. (oligop_july06.tex

“Oil above Water”

“…10 We consider the oil market as an oligopoly, as most models and analyses of energy systems focus on the oligopolistic structure of the oil market (see e.g., Griffin, 1985;Alhajji & Huettner, 2000;Salo & Tahvonen, 2001;Kaufmann et al , 2004;Hartwick & Brolley, 2008;Mileva & Siegfried, 2012).…”

“… 10. We consider the oil market as an oligopoly, as most models and analyses of energy systems focus on the oligopolistic structure of the oil market (see, e.g., Griffin 1985; Alhajji and Huettner 2000; Salo and Tahvonen 2001; Kaufmann et al 2004; Hartwick and Brolley 2008; Mileva and Siegfried 2012). The view that Organization of the Petroleum Exporting Countries has a significant impact on production levels of member states has been recently challenged by Colgan (2013a), but this does not change the oligopolistic nature of the oil market (i.e., the market is still dominated by a small number of producers). …”

Basic economics of nonrenewable resource use

“…See for example Maskin and Newbery (1990). Hartwick and Brolley (2008) investigated closed loop duopoly extraction for the case of a linear market demand schedule and linear extraction costs for each player. They discovered that the closed loop and open loop cases were the same with their specification.…”

On the Multiplicity of Equilibrium Strategies in a Non-Renewable Natural Resource Duopoly

“…In order to characterize the series of production decisions, we make use of condition (4) and derive the following recurrence equation :…”

“…Although such an exogenous terminal time is not necessarily a realistic assumption in resource extracting oligopolies, it becomes an underlying implicit assumption when a particular market structure is assumed to prevail until the exhaustion of the resource. This observation applies to the discrete-time model of Hartwick and Brolley (2008) who assume initial resource stocks of players to be such that exhaustion of the resource occurs in the same period. They find that a player's closed-loop strategy is independent of its competitor's, or equivalently, that closed-loop and open-loop strategies coincide.…”