Strong Time-Consistency in the Cartel-Versus-Fringe Model

35 Pages Posted: 11 Dec 1996

See all articles by Aart de Zeeuw

Aart de Zeeuw

Tilburg University - Department of Economics

Fons Groot

Vrije Universiteit Amsterdam

Cees Withagen

Free University of Amsterdam; Tilburg University

Date Written: Undated

Abstract

In the seventies and eighties, the theory of exhaustible natural resources developed a branch, which was called the cartel-versus-fringe model, to characterize markets with one large coherent cartel and a big number of small suppliers named the fringe. It was considered appropriate to use the von Stackelberg solution concept, but because solutions could only be derived in an open-loop, framework time-inconsistency resulted. This paper solves time-inconsistency in the cartel- versus-fringe model and provides the feedback von Stackelberg equilibrium for all cost configurations.

JEL Classification: L11, C73

Suggested Citation

de Zeeuw, Aart J. and Groot, Fons and Withagen, Cees A. M., Strong Time-Consistency in the Cartel-Versus-Fringe Model (Undated). Available at SSRN: https://ssrn.com/abstract=1552 or http://dx.doi.org/10.2139/ssrn.1552

Aart J. De Zeeuw (Contact Author)

Tilburg University - Department of Economics ( email )

P.O. Box 90153
Tilburg, 5000 LE
Netherlands
+31 13 466 2065 (Phone)
+31-13-466-3042 (Fax)

Fons Groot

Vrije Universiteit Amsterdam ( email )

De Boelelaan 1105
Amsterdam, 1081HV
Netherlands
+31-(0)20-44 49541 (Phone)

Cees A. M. Withagen

Free University of Amsterdam ( email )

Tinbergen Institute De Boelelaan 1105
1081 HV Amsterdam
Netherlands

Tilburg University ( email )

Postbus 90153
Tilburg, DC 5000 LE
Netherlands

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