The New Palgrave Dictionary of Economics

2018 Edition
| Editors: Macmillan Publishers Ltd

Organization of the Petroleum Exporting Countries (OPEC)

  • James L. Smith
Reference work entry


Since the 1960s, the Organization of the Petroleum Exporting Countries (OPEC) has dominated the world oil market by exercising physical control over a large portion of the world’s oil reserves. Coordinated production restraint among OPEC members has artificially limited the supply of oil and succeeded in pushing oil prices far above the competitive level. Despite its past success, OPEC faces three basic problems that, in the long run, tend to undermine all cartels: coordination failures, opportunistic cheating, and the entry of competing producers who manage to find and bring alternative supplies to the market.


Barriers to entry Cartels Cheating Coordination Cournot oligopoly Entry Free-rider problem Organization of Petroleum Exporting Countries (OPEC) Prisoner’s Dilemma Stackelberg dominant-firm models 

JEL Classification

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Copyright information

© Macmillan Publishers Ltd. 2018

Authors and Affiliations

  • James L. Smith
    • 1
  1. 1.