Asymmetric Oligopoly Equilibrium In A Non-renewable Resource Market: Theory And Evidence

I analyze oligopoly equilibrium in a non-renewable resource market where firms can argue their initial resource endowment. I use the model to generate two testable implications. First, given the existing distribution of reserves across firms, firms with small reserves will extract a larger shares of their reserves than will the firms with large reserves. This effect leads to increased industry concentration over time. Second firms with small existing reserves will have greater willingness to pay for additions to reserves than firms with large reserves. This effect would tend to lessen industry concentration. Using data on the U.S oil industry, I find that empirical evidence is consistent with both implications.