Monopoly, potential competition and private stock information in exhaustible resource markets

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Abstract

This paper develops an exhaustible resource model with an incumbent monopolist that faces future potential entry of a single rival or backstop technology. The model is characterized by private stock information in the sense that firms do not know with certainty the size and/or quality of their rival's reserve stock. Results indicate that if such information is private, the strategic response of the monopolist to an entry threat is to extract reserves in the pre-entry era at a rate faster than would a pure monopolist in an uncontested market, and thus could lead to an improvement in economic welfare relative to the situation where entry is restricted.

Original languageEnglish (US)
Pages (from-to)419-433
Number of pages15
JournalNatural Resource Modeling
Volume13
Issue number4
DOIs
Publication statusPublished - Dec 2000

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All Science Journal Classification (ASJC) codes

  • Modeling and Simulation
  • Environmental Science (miscellaneous)

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