Nash-Cournot Equilibrium for an Exhaustible Resource Like Oil

The question of whether the liberalization of the gas industry has led to less concentrated markets has attracted much interest among the scientific community. Classical mathematical regression tools, statistical tests, and optimization equilibrium problems, more precisely non-linear complementarity problems, were used to model European gas markets and their effect on prices. In this research, the parametric and nonparametric game theory methods are employed to study the effect of the market concentration on gas prices. The parametric method takes into account the classical Cournot equilibrium test, with assumptions on cost and demand functions. However, the non-parametric method does not make any prior assumptions, a factor that allows greater freedom in modeling. The results of the parametric method demonstrate that the gas suppliers’ behavior in Austria and The Netherlands gas markets follows the Nash–Cournot equilibrium, where companies act rationally to maximize their payoffs. The non-parametric approach validates the fact that suppliers in both markets follow the same behavior even though one market is more liquid than the other. Interestingly, our findings also suggest that some of the gas suppliers maximize their ‘utility function’ not by only relying on profit, but also on some type of non-profit objective, and possibly collusive behavior.

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Lobbying over Exhaustible-Resource Extraction

European Economic Review ◽

10.1016/j.euroecorev.2021.103740 ◽

2021 ◽

pp. 103740

Author(s):

Achim Voss ◽

Mark Schopf

Keyword(s):

Resource Extraction ◽

Exhaustible Resource

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On scale economies and exhaustible resource markets

Review of Industrial Organization ◽

10.1007/bf02354218 ◽

1985 ◽

Vol 2 (2) ◽

pp. 144-159

Author(s):

Charles F. Mason

Keyword(s):

Scale Economies ◽

Exhaustible Resource ◽

Resource Markets

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On the existence of Cournot equilibrium without concave profit functions: Acknowledgment

Journal of Economic Theory ◽

10.1016/0022-0531(77)90028-x ◽

1977 ◽

Vol 16 (2) ◽

pp. 521

Author(s):

John Roberts ◽

Hugo Sonnenschein

Keyword(s):

Cournot Equilibrium ◽

Profit Functions

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Unequal Treatment of Identical Agents in Cournot Equilibrium

The American Economic Review ◽

10.1257/aer.89.3.585 ◽

1999 ◽

Vol 89 (3) ◽

pp. 585-604 ◽

Cited By ~ 110

Author(s):

Stephen W Salant ◽

Greg Shaffer

Keyword(s):

Marginal Cost ◽

Consumer Surplus ◽

Production Costs ◽

Cournot Equilibrium ◽

Unequal Treatment ◽

Marginal Costs ◽

Second Stage ◽

Policy Debates ◽

The Cost ◽

Antitrust Regulation

Oligopoly models where prior actions by firms affect subsequent marginal costs have been useful in illuminating policy debates in areas such as antitrust regulation, environmental protection, and international competition. We discuss properties of such models when a Cournot equilibrium occurs at the second stage. Aggregate production costs strictly decline with no change in gross revenue or gross consumer surplus if the prior actions strictly increase the variance of marginal costs without changing the marginal-cost sum. Therefore, unless the cost of inducing second-stage asymmetry more than offsets this reduction in production costs, the private and social optima are asymmetric. (JEL D43, L13, L40)

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