Gains to producers from the cartelization of exhaustible resources

Abstract

The potential gains to producers from the cartelization of the world petroleum, copper, and bauxite markets are calculated under the assumption of optimal dynamic monopoly pricing of an exhaustible resource. Small quantitative models for the markets for each resource are developed that account for short-term lag adjustments in demand and supply as well as long-term resource depletion. Potential gains from the cartelization of each resource are measured by calculating optimal price trajectories under competition and under cartelization, and comparing the sums of discounted profits resulting from each.