ABSTRACT
The most important objective of this chapter is the development of a two-sided Stackleberg modeling framework for the analysis of cartelized nonrenewable resource markets. The major advantage of using a two-sided model is that it allows one to represent both sectors as profit maximizers that take full account of the depletable and/or increasing cost characteristics of their resources. Model B is the same as Model A except for the representation of the non-cartel sector and the way the cartel accounts for it. Model B is less useful for developing specific analyses of the model solution. Model A was based on a net cartel demand function; non-cartel supply was assumed to have previously been subtracted from total demand. The chapter discusses the following three tasks: Formulating the non-cartel supply model; deriving and interpreting the equilibrium conditions for that model; and formulating the cartel supply model, representing knowledge of the non-cartel model by incorporating its equilibrium conditions as state equations.
