Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/103416
Authors: 
Berk, Istemi
Year of Publication: 
2014
Series/Report no.: 
EWI Working Paper 14/13
Abstract: 
This paper analyzes the strategic firm behavior within the context of a two-period resource duopoly model in which firms face endogenous intertemporal capacity constraints. Firms are allowed to invest in capacity in between two periods in order to increase their initial endowment of exhaustible resource stocks. Using this setup, we find that the equilibrium price weakly decreases over time. Moreover, asymmetric distribution of initial resource stocks leads to a significant change in equilibrium outcome, provided that firms do not have the same cost structure in capacity additions. It is also verified that if only one company is capable of investment in capacity, the market moves to a more concentrated structure in the second period.
Subjects: 
Dynamic Duopoly
Cournot Competition
Endogenous Intertemporal Capacity Constraints
Subgame Perfect Nash Equilibrium
JEL: 
D43
L13
Q32
Q4
Document Type: 
Working Paper

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