Strategic Behavior and the Environment > Vol 4 > Issue 3

Some Effects of Asymmetries in a Common Pool Natural Resource Oligopoly

Hassan Benchekroun, Department of Economics and CIREQ, McGill University, Canada, , Gérard Gaudet, Département de sciences économiques and CIREQ, Université de Montréal, Canada, Hervé Lohoues, African Development Bank, Tunisia
Suggested Citation
Hassan Benchekroun, Gérard Gaudet and Hervé Lohoues (2014), "Some Effects of Asymmetries in a Common Pool Natural Resource Oligopoly", Strategic Behavior and the Environment: Vol. 4: No. 3, pp 213-235.

Publication Date: 11 Aug 2014
© 2014 H. Benchekroun, G. Gaudet and H. Lohoues
Industrial Organization,  Game theory
Cost asymmetriesRenewable resourceCommon pool oligopolyMarkov Perfect Nash Equilibrium


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In this article:
1. Introduction 
2. The Model 
3. Characterization of an Equilibrium 
4. Conclusion 


We consider a renewable resource being exploited in common by firms that compete both in the output market and in the exploitation of the resource. We show that the introduction of the slightest cost differentiation among the firms can have a drastic effect on the nature of the equilibria that may be expected as compared to the identical cost case. To do this, we take as a benchmark case a Markov Perfect Nash Equilibrium that exists with identical cost firms, with the property that the firms play a linear strategy up to some endogenously determined threshold level of the stock and the static Cournot equilibrium strategy beyond that threshold. Having shown that an equilibrium of that nature is not sustainable with asymmetric cost, we fully characterize a Markov Perfect Nash Equilibrium of the differential game for that case.