Abstract
This paper introduces intertemporal decision making of the consumers, including different price expectations (myopic, rational), into the framework of monopolistic resource depletion. This adds another dynamic feature which has been neglected by and large by the literature. In particular a differential game of the von Stackelberg type between consumers and an oil extracting monopoly is considered. Analytical solutions are obtained when demand is linear. This framework is then empirically applied to derive and reconcile rational OPEC strategies and past behaviour.
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Wirl, F. Dynamic demand, consumers' expectations and monopolistic resource extraction: An application to OPEC pricing policies. Empirical Economics 16, 379–400 (1991). https://doi.org/10.1007/BF01206035
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DOI: https://doi.org/10.1007/BF01206035