Abstract
In this paper the feedback Stackelberg equilibrium (FSE) for the cartel-versus-fringe model of the supply of a natural exhaustible resource is derived. This model is a linear quadratic differential game, where all players face restrictions on their instruments. The FSE is derived analytically by identifying the value functions that satisfy the Hamilton-Jacobi-Bellman (HJB) equations. For a part of the parameter space the system of HJB equations does not have a unique solution. For those cases, it is shown that there are two sets of value functions corresponding with different strategies that solve this system of partial differential equations. The FSE is that solution that leads to the highest profits for the leader, the cartel.
A working paper with the same title with the results presented in more detail is available upon request from the author.
Financially supported by Cooperation Centre Tilburg and Eindhoven Universities.
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© 1991 Springer-Verlag
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Groot, F. (1991). The feedback Stackelberg equilibrium in the cartel-versus-fringe model. In: Hämäläinen, R.P., Ehtamo, H.K. (eds) Dynamic Games in Economic Analysis. Lecture Notes in Control and Information Sciences, vol 157. Springer, Berlin, Heidelberg. https://doi.org/10.1007/BFb0006223
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DOI: https://doi.org/10.1007/BFb0006223
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